Topic: Legal terminology
Difficulty: 1 Easy
46. In settling an estate, what is the meaning of the term devise?
47. What is the purpose of the Uniform Probate Code?
48. How may real property be treated in identifying estate property subject to probate?
49. What choices does an executor of an estate have in determining the values of assets included
in the estate for tax purposes?
50. What is a remainderman of trust property?
51. What are the three goals of probate laws?
52. What is the difference between an executor and an administrator?
53. What are the four levels of claims in the order of priority of the Uniform Probate Code?
54. In settling an estate, what is the meaning of the term legacy?
55. The estate of Kent Talbert reported the following information:
Required:
Prepare a schedule to show the amount of the taxable estate.
56. Prepare a schedule to show the amount of taxable income.
57. Prepare a schedule to show the amount of federal income tax that must be paid.
Income tax:
15% on the first $2,550
$ 382.50
25% on the next $3,400 (subtotal $5,950)
850.00
28% on the next $3,100 (subtotal $9,050)
868.00
33% on the next $3,350 (subtotal $12,400)
1,105.50
39.6% on the next $3,640 (total $16,040)
1,441.44
Federal income tax
$4,647.44
Learning Objective: 19-03
I charge myself with:
Assets per original inventory
Assets subsequently discovered:
Rental income receivable
Dividends receivable
Gain on sale of Starbucks stock
Total charges
58. The executor of the estate of Yelbert Toper recorded the following information:
Assets discovered at death (at fair value):
Cash
$780,000
Life insurance receivable
260,000
Investments in common stock of companies:
Warner Brothers
14,300
Starbucks
35,100
General Motors
44,200
Dell Technologies
41,600
Rental property
380,000
Cash outflows:
Funeral expenses
$ 27,300
Executor fees
15,600
Ordinary repairs of rental property
2,600
Debts
105,300
Distribution of income to income beneficiary
5,200
Distribution of cash to charitable remainder trust
390,000
Cash inflows:
Sale of Starbucks stock
$ 39,000
Rental income ($5,200 earned prior to death)
14,300
Dividend income ($2,600 declared prior to death)
15,600
Life insurance proceeds
260,000
Debts of $22,100 still remain to be paid. The shares of Dell Technologies stock were conveyed
to the appropriate beneficiary. Executor fees are allocated based on total charges for principal
and for income.
Required:
Prepare a charge and discharge statement for this estate.
I credit myself with:
Debts of decedent
$105,300
Funeral expenses
27,300
Executor fees (15,600-217)
15,383
Legacies distributed:
Charitable remainder trust
390,000
Transfer of Dell Technologies stock
41,600
579,583
Estate principal
$ 987,317
Estate principal:
Cash [780,000 – 83,200 debts paid – 42,683 –
390,000 + 5,200 + 2,600]
$ 271,917
Life insurance proceeds
260,000
Starbucks proceeds
39,000
Investments [14,300 + 44,200]
58,500
Rental property
380,000
Less debts remaining unpaid
( 22,100)
Estate principal
$ 987,317
As to Income
I charge myself with:
Rental income
$ 9,100
Dividend income
13,000
Total charges
$ 22,100
I credit myself with:
Repair expenses
$ 2,600
Executor fees
217
Legacy: Income to beneficiary
5,200
Total credits
8,017
Balance as to income
$ 14,083
Balance as to income:
Cash
$ 14,083
Learning Objective: 19-05
Topic: Reporting―Charge and Discharge Statement
Difficulty: 3 Hard
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Use the following to answer questions 59 – 69:
REFERENCE: 19-05
The executor of the Estate of Kate Tweed discovered the following assets (at fair value):
59. Prepare the journal entry to record the property of the estate.
60. For the Estate of Kate Tweed, a total amount of interest of $9,100 was collected.
Prepare the journal entry to record the collection.
61. Funeral expenses of $26,000 were paid.
Prepare the journal entry to record the transaction.
Funeral and Administrative Expenses
$26,000
Cash – Principal
$26,000
Learning Objective: 19-04
Topic: Estate recordkeeping
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
REFER TO: 19-05
62. Debts of $52,000 were discovered.
Prepare the journal entry to record the transaction.
63. Assuming an additional savings account of $15,600 was located by the executor, prepare the
journal entry required to record the transaction.
Cash – Principal
Assets Subsequently Discovered
64. Title to the residence was conveyed to Louis Tweed. Prepare the journal entry to record the
transaction.
Legacy – Louis Tweed
Residence
65. The life insurance policy was collected. Prepare the journal entry to record the transaction.
66. Additional debts of $78,000 were discovered. Debts totaling $130,000 were paid. Prepare
the journal entry to record the transaction.
67. Cash of $195,000 was conveyed to the appropriate beneficiary. Prepare the journal entry to
record the transaction.
Cash – Principal
Rental income
Insurance
Property taxes
7,800
Paving (considered an extraordinary repair)
Maintenance
68. The shares of Apple were sold for $145,600. Prepare the journal entry to record the
transaction.
Cash – Principal
$145,600
Investment in Apple
$143,000
Gain on Sale of Investment
2,600
69. Administrative expenses of $13,000 were paid. Prepare the journal entry to record the
transaction.
Required:
Prepare all required journal entries for this trust fund including the entry to create the trust.
Income Tax:
15% on the first $2,550
$ 382.50
25% on the next $3,400 (subtotal $5,950)
850.00
28% on the next $1,450 (subtotal $7,400)
406.00
Total Federal income tax
$1,638.50
Learning Objective: 19-03
Topic: Estate and inheritance taxes
Difficulty: 3 Hard
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Use the following to answer questions 72 – 82:
REFERENCE: 19-06
The executor of Danny Mack’s estate has listed the following properties at fair value: Cash
$200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental
Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of
various debts incurred before the decedent’s death. The cost of Danny Mack’s funeral was
$20,000.
[QUESTION]
REFER TO: 19-06
72. Prepare the journal entry to record the property of the estate.
Life Insurance Receivable
Investment in Stocks and Bonds
Rental Property
Personal Property
Estate Principal
73. Prepare the journal entry for claims of $100,000 made against the estate for various debts
incurred before the decedent’s death, and $20,000 for funeral expense bills.
74. Prepare the journal entry to record interest of $5,000 that was earned on the bonds of the
estate. Of this amount, $2,000 had been earned prior to death.
75. Prepare the journal entry to record ordinary repairs to the rental property of $5,000.
76. Prepare the journal entry to record the payment of the estate’s liabilities for debts incurred
prior to the decedent’s death.
77. Prepare the journal entry to record the sales of the stocks and bonds for $120,000
78. Prepare the journal entry to record the collection of rental income of $10,000. $1,000 had
been earned prior to the decedent’s death.
79. Prepare the journal entry to record the distribution of $4,000 to Anna Lee, an income
beneficiary.
As to Principal
I charge myself with:
Assets per original inventory
Assets subsequently discovered:
Interest receivable
$ 2,000
Rental income receivable
Gain on sale of stocks
70,000
Total charges
80. Prepare the journal entry to record the collection of the life insurance policy.
$500,000
Life Insurance Receivable
$500,000
81. Prepare the journal entry to record payment of $20,000 in funeral expenses.
Funeral Expenses
$20,000
Cash—Principal
$20,000
Learning Objective: 19-04
Topic: Estate recordkeeping
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
REFER TO: 19-06
82. Prepare a Charge and Discharge Statement for the estate.
I credit myself with:
Debts of decedent
$ 100,000
Funeral expenses
20,000
Total credits
120,000
Estate principal
$ 883,000
Estate principal:
Cash
$703,000
Rental property
100,000
Personal property
80,000
Estate principal
$ 883,000
As to Income
I charge myself with:
Interest income
$ 3,000
Rental income
9,000
$ 12,000
I credit myself with:
Repair expenses
$ 5,000
Legacy: Anna Lee
4,000
9,000
Balance as to Income
$ 3,000
Balance as to income:
Cash
$ 3,000
Learning Objective: 19-05
Topic: Reporting―Charge and Discharge Statement
Difficulty: 3 Hard
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement