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30.(30 Minutes) (Define terms used in estate accounting)
a. Will—the instructions, prepared consistent with the applicable state laws,
given by an individual to direct the distribution to be made of the person's
property after death.
result of the specifications of a will.
g. Charitable remainder trust—a trust fund where the income is paid to one or
more beneficiaries for a specified period (or until their death). After that
point in time, the principal is conveyed to a named charity.
j. Homestead allowance—an amount that is provided to a decedent's
surviving spouse and/or minor and dependent children before claims
against the estate are paid. This allowance ensures that (if assets are
available) some amount is given to the immediate family regardless of the
amount of debt incurred by the decedent.
31.(30 Minutes) (Discussion of questions about estates)
a. Probate laws are state laws that govern wills and estates. These laws
provide an orderly structure for the process of administering a decedent’s
estate (property). The Uniform Probate Code has been adopted by many
b. The executor must locate and preserve all of the assets owned by the
decedent at death, discover and satisfy (if sufficient assets are available)
all valid claims against the estate, determine the wishes of the decedent as
c. All property of value should be included in an inventory of estate assets.
Thus, cash, investments, receivables, and other valuables should all be
listed. In some states, real property (such as land) is conveyed directly to a
d. The order of priority for paying claims against an estate are as follows:
(1)—expenses of administering the estate.
32.(20 Minutes) (Identify parties in connection with will)
a. Howard Amadeus has been designated to receive the principal of the trust
fund after Lucy Van Jones' death and is, therefore, referred to as the
remainderman.
a gift of specified personal property.
f. Lucy Van Jones will receive the income from the trust fund for the remainder
of her life, a position known as a life tenant.
33.(30 Minutes) (Distribution to be made of an estate)
a. 800 shares of Coca-Cola Co. stock are given to Cindy Cheng. Since the estate
does not own more Coca-Cola stock, this is all Cindy will receive.
Title to the house goes to Dennis Davis as the decedent directed.
b. 1,000 shares of Coca-Cola Co. stock are given to Cindy Cheng. The additional
200 shares will either be transferred to the residuary beneficiary, or liquidated
if necessary to satisfy other bequests.
$50,000 cash in the First National Bank goes to Jack Abrams.
Any remaining property is conveyed to Wilbur N. Ed.
34.(5 Minutes) (Compute the taxable estate value)
Value of estate assets ..................................................... $2,300,000
Conveyed to spouse ........................................................ (1,000,000)
Conveyed to charities ..................................................... (260,000)
Amounts conveyed to children or to most trusts are not deductible in
35.(15 Minutes) (Determine taxable estate value)
Gross Estate (fair market value) .................................... $2,381,000
Funeral Expenses ........................................................... $ 20,000
Administration Expenses ............................................... 10,000
36.(5 Minutes) (Computation of income tax on an estate)
Rental income ................................................................. $ 9,000
Interest income ................................................................ 6,000
Dividend income .............................................................. 5 ,000
37.(60 Minutes) (Record journal entries for an estate and prepare charge and
discharge statement)
a. –– Cash—Principal .......................................................... 300,000
Life Insurance Receivable ......................................... 200,000
1. No entry. Estates do not record liabilities until assets are used in payment.
2. Cash—Principal .......................................................... 5,000
3. Expenses—Income .................................................... 6,000
Cash—Income .................................................. 6,000
(Ordinary repair expenses are made to rental property and are generally
charged to income rather than principal.)
additional proceeds becoming part of the estate’s principal.)
6. Cash—Principal ......................................................... 2,000
Cash—Income ........................................................... 12,000
Assets Subsequently Discovered (Rent Rec.) 2,000
Estate Income .................................................. 12,000
(To record receipt of rental income. The $2,000 earned prior to the
decedent's death was not included in original listing of estate assets and is
therefore an ‘asset subsequently discovered’.)
(Collection is made from life insurance policy.)
Legacy—Amanda Blake ............................................. 200,000
Cash—Principal ............................................... 200,000
(Payment is made of proceeds from life insurance policy.)
b.
ESTATE OF ROSE SHIELDS
Charge and Discharge Statement
As to Principal
I charge myself with:
Assets per original inventory .................................... $820,000
Assets subsequently discovered:
Interest receivable ................................................ $ 5,000
I credit myself with:
Debts of decedent ...................................................... 80,000
Funeral expenses ....................................................... 10,000
Legacy: Amanda Blake (proceeds of life
insurance) .............................................................. 200,000 290,000
Estate principal ..................................................... $540,000
Estate principal:
Estate principal ..................................................... $540,000
As to Income
I charge myself with:
Interest income ........................................................... $ 7,000
Rental income ............................................................. 12,000 $19,000
38.(45 Minutes) (Prepare charge and discharge statement for an estate)
ESTATE OF GINA PURCELL
Charge and Discharge Statement
As to Principal
I charge myself with:
Assets per original inventory .................................... $1,204,000
Assets subsequently discovered:
Rental income receivable ..................................... $ 4,000
Dividends receivable ............................................ 2,000 6,000
Gain on sale of Polaroid stock .................................. 3,000
Total charges ......................................................... $1,213,000
As to Income
I charge myself with:
Rental income ............................................................. $ 7,000
Dividend income ......................................................... 10,000 $17,000
I credit myself with:
Repair expenses ......................................................... 2,000
39.(30 Minutes) (Prepare journal entries for an estate)
Note: Since the income and principal of this estate are both to go to the same
beneficiary, no reason exists for separately labeling the assets as being
derived from principal and income.
a. Cash ................................................................................. 80,000
Interest receivable ........................................................... 6,000
Estate Principal .......................................................... 886,000
b. Cash ................................................................................. 7,000
Interest receivable ...................................................... 6,000
Estate income interest ............................................... 1,000
f. Legacy—Kevin Simmons ................................................ 200,000
Residence ................................................................. 200,000
g. Cash ................................................................................. 300,000
Life Insurance receivable (payable to estate) ......... 300,000
h. Debts of the decedent ..................................................... 100,000
j. Cash ................................................................................. 112,000
Investment in Polaroid ............................................... 110,000
Gain on sale ................................................................ 2,000
k. Administrative expenses ................................................ 10,000
Cash.............................................................................. 10,000
40.(60 Minutes) (Prepare journal entries for an estate and a charge and discharge
statement)
Note: Since the income and principal of this estate are both to go to the same
beneficiary, no reason exists for separately labeling the assets as being
derived from principal and income.
1. Cash ................................................................................. 19,000
Certificates of deposit ..................................................... 90,000
2. Cash ................................................................................. 450,000
Life insurance receivable — payable to estate ....... 450,000
3. Cash ................................................................................. 4,000
Dividend receivable .................................................... 3,000
Estate income ............................................................. 1,000
4. No entry. Debts are only recorded by an estate when paid.
9. Legacy—Ned Pope ......................................................... 110,000
Cash ............................................................................. 110,000
10.Cash ................................................................................. 81,000
Investment in Ford Motor Co..................................... 72,000
Gain on sale ................................................................ 9,000
