E13.15 Split-Interest Agreement

At the beginning of the current year, Pauline Doyle gave Rocky Mountain College $600,000 in cash, with the provision that the cash be invested in incomeproducing securities. The college is to pay Pauline the income from the investments for her remaining life. Upon her death, remaining resources become available to the college with no restrictions as to use. The college invested the $600,000 in securities earning dividend and interest income of $17,000, received in cash. The securities have a fair value of $601,000 at the end of the year.

Required

Prepare journal entries to record the splitinterest agreement during the current year. Investment income is defined as dividend and interest income and unrealized gains and losses.