Buku Beams AdvAcc11 Chapter23

Find more slides, ebooks, solution manual and testbank on www.downloadslide.
com
Chapter 23
ESTATES AND TRUSTS
Answers to Questions
1 No, trust accounting is essentially cash basis accounting. Field Code Changed
2 Income is earned on the principal amounts of estate and trust assets.

Estates frequently realize income from various investments between the
time that the property inventory is filed by the executor and the time
the estate is fully administered. A primary reason for dividing estate
principal and income is that the beneficiaries are likely to be
different. Separation of principal and income is also important for
trusts, because often a trusts principal is to be maintained intact
until the death of the beneficiary.
3 A devise is a testamentary disposition of real or personal property.
4 If a decedent had a valid will in force at the time of death, he or she

is said to have died testate. In the absence of a valid will, the
decedent is said to have died intestate.
5 The Uniform Probate Code entitles the surviving spouse to a homestead

allowance that is exempt from and has priority over all claims against
the estate. The surviving spouse and minor children who were dependent
on the deceased are also entitled to a reasonable family allowance to be
paid out of estate property during the period in which the estate is
being administered. The family allowance is exempt from and has priority
over all claims except the homestead allowance. Allowance amounts vary
across the states.
6 Yes, the value of the estate is reduced by funeral expenses, settlements

of estate liabilities, bequests to qualified charities, a marital
deduction, state-level taxes, expenses of estate administration, and a
tax exempt amount.
7 The taxable amount of an estate is based on fair values of all estate

assets at the date of death.
8 Yes, within certain limitations. Currently any number of annual gifts of

$13,000 each can be made, with a lifetime limit of $1,000,000.
9 Income for estates and trusts and applicable tax rates are defined in
essentially the same manner as for individuals. Income includes interest
and dividends, rent, etc. Deductions and/or exemptions for estate
administration fees, charitable donations and distributions to
beneficiaries reduce taxable income. The fiduciary of the estate must
provide applicable information to the beneficiary on Schedule K-1.
10 An estate may be subject to taxation (referred to as estate or

inheritance taxes) at both the state and federal levels. Accountants and
attorneys play a vital role in estate planning to minimize these tax
burdens for their clients and heirs. Even if the federal tax is
permanently repealed, estate planning services will remain critical for
larger estates subject to state level taxation.
2011 Pearson Education, Inc. publishing as Prentice Hall

23-1
Find more slides, ebooks, solution manual and testbank on www.downloadslide.com
23-2 Estates and Trusts

Federal taxation of estates is currently in a period of flux. The
Economic Growth and Tax Relief Reconciliation Act of 2001 proposed
reduction of the tax, and a total repeal in 2010. This law was
subsequently amended by the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act that was signed into law on
December 17, 2010 which provided the federal estate tax exemption
and rate for 2010-2012. This rate is only good until December
31, 2012, at which time the exemption and rate will revert to
2002 levels unless Congress acts.
11 A valid will ensures the disposition of estate assets in accordance with
the wishes of the deceased. If a valid will is not in place, assets will
be distributed in accordance with state probate laws. Preparation of a
will is also an important part of overall estate planning and can be
useful in reducing estate and inheritance taxes.
12 In addition to federal and state estate and inheritance taxes, estates

are also subject to federal (and possibly state) income taxes. An estate
is a taxable entity and is subject to tax on income earned from the date
of death until final settlement of the estate. The tax may be paid by
the estate or by the beneficiary if estate property has already been
distributed to the beneficiary.
SOLUTIONS TO EXERCISES
Solution E23-1
a Cash (+A) 9,000
Interest receivable - bonds (-A) 4,400
Estate income (R,+SE) 4,600
b Devise - Atlanta Animal Shelter (E,-SE) 100,000
Cash (-A) 100,000
c Funeral expenses (E,-SE) 16,400
Cash (-A) 16,400
d Cash (+A) 50,000
Interest receivable (+A) 1,200
Assets subsequently discovered (-A) 51,200
Cash (+A) 3,000
Interest receivable (-A) 1,200

Chapter 23 23-3
Solution E23-2
a Cash (+A) 15,000
b Devise - symphony orchestra (E,-SE) 150,000
Cash (-A) 150,000
c Probate expenses (E,-SE) 2,800
Cash (-A) 2,800
d Funeral expenses (E,-SE) 12,800
Cash (-A) 12,800
e Estate principal (-SE) 44,000
Accounts payable (+L) 44,000
Solution E23-3
a Dividend receivable (+A) 300,000
b No entry on this date, since no distribution has yet been made.
c Probate court expenses (E,-SE) 3,800
Cash (-A) 3,800
Cash (-A) 11,600
e Hospital fees and expenses (E,-SE) 37,000
Cash (-A) 37,000
f Cash (+A) 300,000
Dividends receivable (-A) 300,000

Solution E 23-4
Melanie Triciao, Testator

Inventory of Estate Assets
As of the date of Death on August 15, 2011
Description of Property Fair Value
Cash $ 118,225
Savings accounts 250,000
ViaReggio common stock 225,000
City of Roma municipal bonds 412,000
Mercedes sports car 41,000
Condominium on Italian Riviera 1,265,500
Atlanta personal residence 430,000
Collection of rare hand puppets 85,000
Fully restored Model T Ford 125,000
$2,951,725
Submitted by K. T. Tim, executor
Solution E23-5
1. Estate Inventory
Jeff Carpenter, Testator
Inventory of Estate Assets
As of the date of death on August 25, 2011
Description of Property Fair Value
Cash in Oxford National Bank $15,000
Certificates of deposit, includes $7,000 accrued 807,000
interest
Personal effects* -
$822,000
*The probate court permitted exclusion of Jeffs
personal effects from the estate inventory. Prepared by
Ms. Colleen Ryan, Executrix, Oxford National Bank

Chapter 23 23-5
Solution E23-5 (continued)
2.
a
Cash (+A) 11,500
b Cash (+A) 800,000
Certificates of deposit (-A) 800,000
c Devise- Sooner XXV trust account (E,-SE) 100,000
Cash (-A) 100,000
Cash (-A) 7,200
e Executrix expenses (E,-SE) 2,500
Cash (-A) 2,500
f Devise - J.J. Kara (E,-SE) 716,800
Cash (-A) 716,800
3. Closing Entries
Estate principal (-SE) 822,000
Estate income (-R,-SE) 4,500
Funeral expenses (-E,+SE) 7,200
Executrix expenses (-E,+SE) 2,500
Devise - Sooner XXV trust (-E,+SE) 100,000
Devise - J.J. Kara (-E,+SE) 716,800

Solution E23-5 (continued)
4. Charge-Discharge Statement
Estate of Jeff Carpenter
Charge-Discharge Statement
For the period of estate administration,
August 25 to September 28, 2011
Estate principal
I charge myself for:
Assets included in estate inventory - total estate $822,000
principal charge
I credit myself for:
Funeral expenses paid $ 7,200
Executrix expenses paid 2,500
Devise paid in cash to Sooner XXV trust account 100,000
Devise paid in cash to J.J. Kara 712,300
Total estate principal discharge $822,000
Estate income
Estate income received during estate administration $4,500
Payment of estate income to J.J. Kara $4,500
Respectfully submitted, Colleen Ryan, Estate Executrix, September
28, 2011.

Chapter 23 23-7
Solution E23-6
9/15 Cash (+A) 100,000

Trust fund principal (+SE) 100,000
9/16 Money market investment (+A) 100,000
Cash (-A) 100,000
10/16 Cash (+A) 417
Trust fund income (R,+SE) 417
10/19 Trust fund expenses (E,-SE) 300

Cash (-A) 300
Cash (-A) 22
11/16 Cash (+A) 417
Cash (-A) 300
12/16 Cash (+A) 417
Cash (-A) 700
Cash (-A) 100
12/31 Interest receivable (+A) 208
- Accrued interest for last month.
12/31 Trust fund principal (-SE) 100,000
Trust fund income (-R,-SE) 1,459
Trust fund expenses (-E,+SE) 1,422
Interest receivable (-A) 208
Money market investment (-A) 100,000
Cash (-A) 37

Solution E23-7
Sooner XXV Trust

For the period of trust administration,
September 15 to December 31, 2011
Trust principal
Assets included in trust - total estate principal $100,000
charge
Transfer of money market investment to J.J. Kara $100,000
Trust income
Trust income received during trust administration $1,459
Funeral expenses paid $ 700
Trust administration fee paid 100
Payments to Puppy Paradise 622
Total trust income discharge $1,422
Payment of remaining trust income to J.J. Kara $ 37
Respectfully submitted, Colleen Ryan, Trust Officer, December 31,
2011.
Solution E23-8
6/1 Cash (+A) 1,000,000
Trust fund principal (+SE) 1,000,000
6/2 Investment in certificate of deposit (+A) 500,000
Cash (-A) 500,000
6/2 Investment in stock mutual fund (+A) 500,000
500,000
Cash (-A)
7/2 Cash (+A) 2,500
Trust fund income (R,+SE) 2,500
($500,000 x 6% x 1/12 year)
Cash (-A) 41

Chapter 23 23-9
Solution E 23-9
Cash (+A) 218,220
Savings accounts (+A) 300,000
Microsystems common stock (+A) 400,000
Big Casino common stock (+A) 120,000
Vintage sports car (+A) 31,000
Mountain cottage (+A) 114,500
Personal residence (+A) 457,500
- To record receipt of property transferred from executor.
Solution E 23-10
a.
Fair value of gross estate $5,300,000
2009 Tax Exempt Estate (3,500,000)
Taxable estate $1,800,000
45% Estate Tax Due $810,000
Balance inherited by Emily $4,490,000
b. There were many estate planning options for Mr. Dogbert. For example, he
could have given assets to Emily during his lifetime or bequeathed funds
to his church or some favorite charities, excluding those amounts from
his estate. If the reduced estate value would fall below the federal tax
threshold, it would have left a zero inheritance tax. However, all of
these options expired with Dogberts demise.

Solution E 23-11
Taxable estate $100,000
45% Estate Tax Due $45,000
$3,555,000
Balance inherited by Emily, Laura and Tom
Solution E 23-12
Taxable estate $19,900,000
45% Estate Tax Due $8,955,000
Balance inherited by Maggie $14,445,000

Chapter 23 23-11
Solution P 23-1
Part 1
June 22 Cash (+A) 15,000

June 24 Cash (+A) 12,000
June 30 Estate expense (E,-SE) 250
Cash (-A) 250
July 4 Estate expense (E,-SE) 4,900
Cash (-A) 4,900
July 12 Cash (+A) 501,300
Certificate of deposit (-A) 500,000
July 15 Cash (+A) 750,000
Certificate of deposit (+A) 500,000
Common stocks (+A) 460,000
Dividend receivable (+A) 12,000
Lake Michigan cottage (+A) 40,000
2005 Corvette (+A) 35,000
Estate principal (+SE) 1,802,000
July 20 Devise - 2005 Corvette - Clark Olson (E,- 35,000
SE)
Devise- Lake cottage - Kent Olson (E,-SE) 40,000
Devise - stocks - Clark Olson (E,-SE) 230,000
Devise - stocks - Kent Olson (E,-SE) 230,000
Lake Michigan cottage (-A) 40,000
2005 Corvette (-A) 35,000
Common stocks (-A) 460,000

Solution P 22-1 (continued)

July 21 Devise - cash fees - Clark Olson (E,-SE) 5,000
Devise - Lana Lang (E,-SE) 200,000
Devise - Jimmys church (E,-SE) 50,000
Devise - Metropolis Symphony (E,-SE) 50,000
Cash (-A) 305,000
Part 2 Closing Entries
July 22 Estate income (-R,-SE) 11,300

Estate expenses (-E,+SE) 5,150
Cash (-A) 6,150
- Close estate income and expenses and
distribute estate net income to Lois
Devise- 2005 Corvette - Clark Olson 35,000
(-E,+SE)
Devise - Lake cottage - Kent Olson (- 40,000
E,+SE)
Devise - stocks - Clark Olson (- 230,000
E,+SE)
Devise - stocks - Kent Olson (- 230,000
E,+SE)
Devise - cash fees - Clark Olson (- 5,000
E,+SE)
Devise - Lana Lang (-E,+SE) 200,000
Devise - Jimmys church (-E,+SE) 50,000
Devise - Metropolis Symphony (E,-SE) 50,000
- Close devise distributions
Cash (-A) 962,000
- Close estate and transfer remaining
cash balance to Trust

Chapter 23 23-13
Part 3
Estate of Jimmy Olson

For the Period of Estate Administration
June 15 to July 22, 2011
Estate Principal
Assets included in estate inventory $1,802,000
Devises paid in cash to:
Clark Olson $ 5,000
Lana Lang 200,000
Jimmys church 50,000
Metropolis Symphony Orchestra 50,000 305,000
Devises distributed in kind to:
Clark Olson 265,000
Kent Olson 270,000 535,000
Transferred to Trust account for Lois
Olson:
Cash 962,000
Total estate principal discharge $1,802,000
Estate Income
Estate income received during estate $11,300
administration
Funeral expenses paid $4,900
Cottage repairs paid 250 $ 5,150
Payment of estate net income to Lois 6,150
Olson
Total estate income discharge $11,300
Respectfully submitted: Clark Olson, Estate Executor, July 22, 2011

Solution P 23-2
Date Accounts Debit Credit
July 22 Cash (+A) 962,000
July 23 Certificate of deposit (+A) 300,000
Cash (-A) 300,000
July 25 Super Stock Mutual Fund (+A) 500,000
Cash (-A) 500,000
July 31 Smallville Municipal Bonds (+A) 100,000
Cash (-A) 100,000
August 22 Cash (+A) 1,500
Trust income (R,+SE) 1,500
August 23 Cash (+A) 305
Trust income (R,+SE) 405
Trust fund expenses (E,-SE) 100
August 31 Trust fund expenses (E,-SE) 3,700
Cash (-A) 3,700

Chapter 23 23-15
Solution P 23-3

March 15 Cash (+A) 66,500
Dividends receivable (+A) 400
Life insurance receivable (+A) 500,000
Personal residence (+A) 325,000
Household furnishings and personal 76,000
effects (+A)
Automobile (+A) 21,000
Investments in stocks (+A) 25,000
Investments in bonds (+A) 200,000
- Record estate inventory at fair
values.
March 25 Funeral expenses (E,-SE) 2,800
Cash (-A) 2,800
March 30 Cash (+A) 500,000
Life insurance receivable (-A) 500,000
April 9 Land (+A) 10,000
- Record lakefront property at cost, awaiting an
appraisal.
April 15 Cash (+A) 3,000
Estate income (R,+SE) 600
April 19 Land (+A) 18,000
- Adjust lakefront property to appraisal.
April 28 Debts of decedent paid (E,-SE) 13,250
Cash (-A) 13,250


April 29 Cash (+A) 500
Dividends receivable (-A) 400
April 30 Devise - Helen Wilson (Home, furnishings 401,000
and personal effects) (E,-SE)
Devise - Helen (cash) (E,-SE) 66,500
Personal residence (-A) 325,000
Household furnishings and personal 76,000
effects (-A)
Cash (-A) 66,500
- Transfer cash and property to Helen
Devise (stocks)- Denise (E,-SE) 25,000
Devise (automobile) - Dennis (E,-SE) 21,000
Devise (cash) - Denise (E,-SE) 700
Automobile (-A) 21,000
Investments in stocks (-A) 25,000
Cash (-A) (Estate Income) 700
- Transfer property to Denise & Dennis
April 30 Assets subsequently discovered (+A) 28,000
Devise - Helen Wilson (-E,+SE) 467,500
Devise - Denise (-E,+SE) 25,700
Devise - Dennis (-E,+SE) 21,000
Debts of decedent paid (-E,+SE) 13,250
Estate income (-R,-SE) 700
- Closing entries
April 30 Estate principal (-SE) 714,750
Cash (-A) 486,750
Investment in bonds (-A) 200,000
Land (-A) 28,000
- Transfer estate property to Wilson Family Trust.

Chapter 23 23-17
Solution P 23-4
Estate of George Wilson
March 1 to April 30, 2011
Estate principal
Assets subsequently discovered
28,000
Assets included in estate inventory - total estate $1,244,300
principal charge
Estate debts paid 13,250
Devise - transfer cash, residence & furnishings to 467,500
Helen
Devise - Transferred automobile to Dennis 21,000
Devise - Transferred stocks to Denise 25,000
Transferred bond investments to Wilson Family Trust 200,000
Transferred Land to Wilson Family Trust 28,000
Transferred cash to Wilson Family Trust 486,750
Estate income
Estate income received during estate administration $700
Payment of estate income to Denise Wilson $700
Respectfully submitted, Estate Executrix, April 30, 2011.

Solution P 23-5
April 30 Cash (+A) 486,750
Land (+A) 28,000
Investment in Bonds (+A) 200,000
May 3 Certificate of deposit (+A) 450,000
Cash (-A) 450,000
May 25 Cash (+A) 31,300
Land (-A) 28,000
May 31 Trust fund expenses(E,-SE) 165
Cash (-A) 165
June 3 Cash (+A) 2,250
June 15 Trust fund expenses (E,-SE) 8,700
Cash (-A) 8,700
June 30 Trust fund expenses (E,-SE) 165
Cash (-A) 165

Chapter 23 23-19
Solution P 23-6
May 31 Dividends receivable (+A) 1,200
Automobile (+A) 2,600
Investments in stocks (+A) 52,000
Investments in bonds (+A) 400,000
- Record estate inventory at fair
values.
June 5 Government bonds (+A) 200,000
June 15 Cash (+A) 750,000
June 16 Cash (+A) 8,000
June 18 Funeral expenses (E,-SE) 4,300
Cash (-A) 4,300
June 22 Interest receivable (+A) 15,000
Cash (+A) 215,000
Government bonds (-A) 200,000
June 23 Cash (+A) 50,000
June 24 Debts of decedent paid (E,-SE) 18,250
Cash (-A) 18,250


June 28 Cash (+A) 1,600
June 30 Devise (stocks) - Sue (E,-SE) 52,000
Devise (automobile) - Pat (E,-SE) 2,600
Executrix fees (E,-SE) 2,500
Devise - Humane society (E,-SE) 1,650
Automobile (-A) 2,600
Investments in stocks (-A) 52,000
Cash (-A) 4,150
June 30 Assets subsequently discovered (+A) 265,000
Estate principal (+SE) 185,350
Devise - Sue (-E,+SE) 52,000
Devise - Pat (-E,+SE) 2,600
Devise - Humane society (-E,+SE) 1,650
Debts of decedent paid (-E,+SE) 18,250
Executrix fees (-E,+SE) 2,500
Estate income (-R,-SE) 1,650
- Closing entries
June 30 Estate principal (-SE) 1,397,900
Cash (-A) 997,900
Investment in bonds (-A) 400,000
- Transfer estate property to Josephson Family Trust.

Chapter 23 23-21
Solution P 23-7
Estate of Tom Josephson
May 16 to June 30, 2011
Estate principal
Assets subsequently discovered
265,000
Assets included in estate inventory - total estate $1,477,550
principal charge
Estate debts paid 18,250
Executrix fees paid 2,500
Devise - Transferred automobile to Pat 2,600
Devise - Transferred stocks to Sue 52,000
Transferred bond investments to Josephson Family 400,000
Trust
Transferred cash to Josephson Family Trust 997,900
Estate income
Estate income received during estate administration $1,650
Payment of estate income to Humane Society $1,650
Respectfully submitted, Estate Executrix, June 30, 2011.

Solution P 23-8
June 30 Cash (+A) 997,900
Investment in Bonds (+A) 400,000
July 5 Certificate of deposit (+A) 750,000
Cash (-A) 750,000
July 31 Trust fund expenses (E,-SE) 275
Cash (-A) 275
August 5 Cash (+A) 3,750
August 19 Trust fund expenses (E,-SE) 15,000
Cash (-A) 15,000

Buku Beams AdvAcc11 Chapter23

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Buku Beams AdvAcc11 Chapter23

Hochgeladen von

Copyright:

Verfügbare Formate

Find more slides, ebooks, solution manual and testbank on www.downloadslide.

ESTATES AND TRUSTS

2 Income is earned on the principal amounts of estate and trust assets.

3 A devise is a testamentary disposition of real or personal property.

4 If a decedent had a valid will in force at the time of death, he or she

5 The Uniform Probate Code entitles the surviving spouse to a homestead

6 Yes, the value of the estate is reduced by funeral expenses, settlements

7 The taxable amount of an estate is based on fair values of all estate

8 Yes, within certain limitations. Currently any number of annual gifts of

10 An estate may be subject to taxation (referred to as estate or

2011 Pearson Education, Inc. publishing as Prentice Hall

23-2 Estates and Trusts

12 In addition to federal and state estate and inheritance taxes, estates

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

23-4 Estates and Trusts

Melanie Triciao, Testator

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

23-6 Estates and Trusts

Solution E23-5 (continued)

2011 Pearson Education, Inc. publishing as Prentice Hall

9/15 Cash (+A) 100,000

10/19 Trust fund expenses (E,-SE) 300

2011 Pearson Education, Inc. publishing as Prentice Hall

23-8 Estates and Trusts

Sooner XXV Trust

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

23-10 Estates and Trusts

2011 Pearson Education, Inc. publishing as Prentice Hall

Interest receivable (-A) 5,000

2011 Pearson Education, Inc. publishing as Prentice Hall

23-12 Estates and Trusts

Solution P 22-1 (continued)

Part 2 Closing Entries

July 22 Estate income (-R,-SE) 11,300

2011 Pearson Education, Inc. publishing as Prentice Hall

Estate of Jimmy Olson

2011 Pearson Education, Inc. publishing as Prentice Hall

23-14 Estates and Trusts

2011 Pearson Education, Inc. publishing as Prentice Hall

Date Accounts Debit Credit

2011 Pearson Education, Inc. publishing as Prentice Hall

23-16 Estates and Trusts

Solution P 23-3 (continued)

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

23-18 Estates and Trusts

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

23-20 Estates and Trusts

Solution P 23-6 (continued)

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

23-22 Estates and Trusts

2011 Pearson Education, Inc. publishing as Prentice Hall

Das könnte Ihnen auch gefallen