Deck 19: Accounting for Estates and Trusts

Question 1

REFERENCE: Ref.14_01
The terms of a will currently undergoing probate are: "A gift to my brother David of $25,000 cash;to my son James,$50,000 from my savings account;and to my Daughter Lila,all of my remaining property." At the time of death,the balance in the savings account was $40,000,and there was additional cash (after payment of funeral expenses and all claims against the estate)of $70,000.
The gift to David is a

A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.

Answer 1

A

Question 2

When a person dies without leaving a valid will,how is the distribution of his or her property determined?

A)in accordance with federal inheritance laws.
B)in accordance with generally accepted accounting principles.
C)in accordance with a plan developed by the executor of the estate.
D)in accordance with state inheritance laws.
E)in accordance with common law.

Answer 2

D

Question 3

Executor's fees and court costs for settling an estate usually

A)must be apportioned between the principal and the income of the estate.
B)are adjustments to the principal of the estate.
C)are adjustments to the income of the estate.
D)are subtracted from life insurance proceeds.
E)are ignored.

Answer 3

A

Question 4

REFERENCE: Ref.19_02
The provisions of a will currently undergoing probate are: "Two thousand shares of Dorn stock to my son;$30,000 in cash from my savings account to my brother;$50,000 in cash to my daughter;and any remaining property divided equally between my son and daughter."
Assume that the estate included 1,200 shares of Dorn stock,$22,000 cash in the savings account,and $70,000 in cash from other sources.What would the daughter have received from the settlement of the estate?

A)$60,000 in cash.
B)$50,000 in cash.
C)$55,000 in cash.
D)$62,000 in cash.
E)$57,000 in cash.

Question 5

How much would James have received from the estate?

A)$50,000.
B)$40,000.
C)$25,000.
D)$45,000.
E)$30,000.

Question 6

Under what circumstances does an estate have an executor?

A)when there is no valid will.
B)when the estate exceeds $2,000,000.
C)when the will establishes a trust fund.
D)when the will is contested.
E)when the will names a specific person to administer the estate.

Question 7

In a will,a devise is a

A)gift of personal property that is directly identified.
B)cash gift from a particular source.
C)gift of estate property that remains after carrying out the other provisions of the will.
D)gift of real property.
E)gift of intangible property.

Question 8

The trustor is the

A)income beneficiary of the trust.
B)ultimate recipient of the principal from the trust.
C)fiduciary who manages the assets in the trust.
D)person who funds the trust.
E)person who disposes of the assets in the trust.

Question 9

A demonstrative legacy is a

A)gift of personal property that is directly identified.
B)cash gift from a particular source.
C)gift of estate property that remains after carrying out the other provisions of the will.
D)gift of real property.
E)gift of intangible property.

Question 10

What is the process of abatement?

A)an attempt to determine the deceased's intentions when the terms of the will are unclear.
B)a reduction of various bequests when the estate is not adequate to satisfy them completely.
C)selling of assets included in an estate to be able to pay creditors.
D)payment of the claims of creditors.
E)the establishment of how the creditors will be paid.

Question 11

REFERENCE: Ref.19_02
The provisions of a will currently undergoing probate are: "Two thousand shares of Dorn stock to my son;$30,000 in cash from my savings account to my brother;$50,000 in cash to my daughter;and any remaining property divided equally between my son and daughter."
Which of the following is not subtracted to arrive at the taxable value of an estate?

A)Liabilities.
B)Charitable bequests.
C)Funeral expenses.
D)Estate administration expenses.
E)Deduction for property conveyed to children of decedent.

Question 12

Which of the following is usually not accounted for as an adjustment to a trust's income?

A)ordinary repairs expense.
B)rent expense.
C)investing costs and commissions.
D)insurance expense.
E)property taxes.

Question 13

When an estate does not have sufficient assets to satisfy all claims against it,what claim has the highest priority?

A)expenses of administering the estate.
B)federal income taxes.
C)state income taxes.
D)medical expenses of the final illness.
E)back wages owed to any employees.

Question 14

In an executor's accounting for an estate,debts and other obligations are recorded

A)at book value.
B)at fair market value.
C)on the date of payment.
D)as soon as they are discovered.
E)only if they are past due.

Question 15

A testamentary trust is a trust

A)intended to protect the assets of a minor.
B)that is managed by the trustor.
C)that is managed by an estate.
D)established by a living person.
E)established by a will.

Question 16

Which of the following is usually accounted for as an adjustment to a trust's principal?

A)repairs expense.
B)rent expense.
C)investing costs and commissions.
D)insurance expense.
E)property taxes.

Question 17

REFERENCE: Ref.19_02
The provisions of a will currently undergoing probate are: "Two thousand shares of Dorn stock to my son;$30,000 in cash from my savings account to my brother;$50,000 in cash to my daughter;and any remaining property divided equally between my son and daughter."
Assume that,at the time of death,the estate included 1,200 shares of Dorn stock,$60,000 cash in the savings account,and $70,000 in cash from other sources.What would the son have received from the settlement of the estate?

A)1,200 shares of Dorn stock and $35,000 in cash.
B)2,000 shares of Dorn stock and $10,000 in cash.
C)2,000 shares of Dorn stock and $25,000 in cash.
D)1,200 shares of Dorn stock and $10,000 in cash.
E)1,200 shares of Dorn stock and $25,000 in cash.

Question 18

How much would Lila have received from the estate?

A)$0.
B)$40,000.
C)$35,000.
D)$45,000.
E)$30,000.

Question 19

REFERENCE: Ref.14_01
The terms of a will currently undergoing probate are: "A gift to my brother David of $25,000 cash;to my son James,$50,000 from my savings account;and to my Daughter Lila,all of my remaining property." At the time of death,the balance in the savings account was $40,000,and there was additional cash (after payment of funeral expenses and all claims against the estate)of $70,000.
The gift to James is a

A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.

Question 20

What guidelines must be followed to classify a transaction as associated with the principal of an estate or as an income transaction?

A)generally accepted accounting principles.
B)federal estate laws.
C)state estate laws.
D)the Internal Revenue Code.
E)the decedent's intentions or state laws.

Question 21

For each of the following situations,select the best answer concerning adjustments to principal and income of an estate.Assume that the will does not specify whether the item is to be classified as principal or income.
(A. )Adjustment to the principal of the estate.
(B. )Adjustment to the income of the estate.
(C. )Allocated between the principal and income of the estate in some fair manner.
(D. )Allocated between the principal and income of the estate determined by existence at date of death.
___ 1.Homestead allowance
___ 2.Insurance expenses
___ 3.Executor's fee
___ 4.Life insurance proceeds when estate is beneficiary
___ 5.Investment commissions
___ 6.Debts incurred prior to death
___ 7.Water and other utility expenses
___ 8.Liquidating dividends
___ 9.Dividend income
___ 10.Funeral expenses
___ 11.Extraordinary repairs on income-producing property
___ 12.Attorney fees
___ 13.Property taxes
___ 14.Gains and losses on the sale of securities
___ 15.Interest income
___ 16.Court costs
___ 17.Ordinary repairs on income-producing property
___ 18.Accounting fees

Question 22

What is the meaning of dying intestate?

Question 23

The estate of Bobbi Jones has the following provisions: total value of estate assets $2,000,000,amount specified to convey to a spouse $1,000,000,amount specified to convey to children $200,000,total debts 400,000,administrative expenses $50,000 and funeral expenses of $30,000.What is the value of the taxable estate?

A)$320,000.
B)$520,000.
C)$550,000.
D)$1,480,000.
E)$1,520,000.

Question 24

A gift that is specified in a will as "I leave $5,000 in cash to my son" is a

A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.

Question 25

How may real property be treated in identifying estate property subject to probate?

Question 26

What choices does an administrator of an estate have in determining the values of assets included in the estate for tax purposes?

Question 27

The provisions of a will currently undergoing probate are: "One thousand shares of Wal-mart stock to my son;$10,000 in cash from my savings account to my brother;$5,000 in cash to my daughter;and any remaining property divided equally between my son and daughter." At the time of death,the estate included 1,400 shares of Walmart stock and $25,000 cash in the savings account.What would the son have received from the settlement of the estate?

A)1,000 shares of Walmart stock and $15,000 in cash
B)1,000 shares of Walmart stock and $0 in cash
C)1,000 shares of Walmart stock and $10,000 in cash
D)1,200 shares of Walmart stock and $5,000 in cash
E)1,400 shares of Walmart stock and $5,000 in cash

Question 28

A gift that is specified in a will as "I leave my collection of baseball cards to my son" is a

A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.

Question 29

In settling an estate,what is the meaning of the term devise?

Question 30

REFERENCE: Ref.19_02
The provisions of a will currently undergoing probate are: "Two thousand shares of Dorn stock to my son;$30,000 in cash from my savings account to my brother;$50,000 in cash to my daughter;and any remaining property divided equally between my son and daughter."
Assume that Bob Smith dies on May 25,2008.Mr.Smith's assets include the following: ABC Stock costing $30,000 but valued at $40,000;a house costing $280,000 but valued at $620,000;life insurance in the amount of $600,000;and cash from various sources totaling $50,700.Three credit cards in Mr.Smith's name had balances totaling $8,530 on the date of death.The estate paid funeral and final medical expenses in the amount of $50,492.There were no charitable gifts designated by the will,and Mr.Smith was single at the time of his death.What is the amount of the taxable estate?

A)$901,678.
B)$1,251,678.
C)$1,268,738.
D)$1,310,700.
E)$2,000,000.

Question 31

Which of the following is not normally viewed as an adjustment to the principal of an estate?

A)Dividends declared prior to death.
B)Investment commissions and other costs.
C)Funeral expenses.
D)Insurance expenses.
E)Debts incurred prior to death.

Question 32

What is meant by estate accounting?

Question 33

After expenses of administering an estate,under the order of priority of the Uniform Probate Code which costs would have priority next?
(1)funeral expenses
(2)medical expenses of the last illness,
(3)debts and taxes given preference under laws,
(4)all other claims.

A)1 and 2.
B)2 and 3.
C)3 and 4.
D)1 and 4.
E)2 and 4.

Question 34

Which of the following is normally viewed as an adjustment to the principal of an estate?

A)Ordinary repair expenses.
B)Insurance expenses.
C)Utility expenses.
D)Major repairs to rental property.
E)Property taxes.

Question 35

A gift that is specified in a will as "I leave $5,000 in cash from my checking account to my daughter" is a

A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.

Question 36

What is the purpose of the Uniform Probate Code?

Question 37

What are the goals of probate laws?
(1)gather and preserve all of the decedent's property;
(2)carry out an orderly and fair settlement of all debts;
(3)discover and follow the decedent's intent for the remaining property

A)1 only.
B)2 only.
C)3 only.
D)1 and 2.
E)1,2,and 3.

Question 38

The provisions of a will currently undergoing probate are: "One thousand shares of Wal-mart stock to my son;$10,000 in cash from my savings account to my brother;$5,000 in cash to my daughter;and any remaining property divided equally between my son and daughter." At the time of death,the estate included 1,000 shares of Walmart stock and $6,000 cash in the savings account.What would the brother have received from the settlement of the estate?

A)$0.
B)$5,000.
C)$6,000.
D)$10,000.
E)$11,000.

Question 39

A gift of any remaining property is a

A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.

Question 40

REFERENCE: Ref.19_02
The provisions of a will currently undergoing probate are: "Two thousand shares of Dorn stock to my son;$30,000 in cash from my savings account to my brother;$50,000 in cash to my daughter;and any remaining property divided equally between my son and daughter."
What is the amount of the personal exemption on an estate income tax return?

A)$0.
B)$100.
C)$300.
D)$500.
E)$600.

Question 41

Debts of $52,000 were discovered.
Prepare the journal entry to record the transaction.

Question 42

REFERENCE: Ref.19_04
The following information pertains to 11 separate questions.
The executor of the Estate of Kate Tweed discovered the following assets (at fair value): The will of Kate Tweed had the following provisions:
$195,000 in cash went to Victor Vickery.
All shares of PepsiCo went to Duchess Doyle.
The residence went to Louis Tweed.
All other estate assets were to be liquidated with the resulting cash going to the Sacred Church of Liberty,Missouri.
Prepare the journal entry to record the property of the estate.

Question 43

The life insurance policy was collected.
Prepare the journal entry to record the transaction.

Question 44

An additional savings account of $15,600 was located by the executor.
Prepare the journal entry to record the transaction.

Question 45

What is a remainderman?

Question 46

For the Estate of Kate Tweed,interest of $9,100 was collected.
Prepare the journal entry to record the collection.

Question 47

The estate of Kent Talbert reported the following information:
Required:
What would be the taxable estate value?

Question 48

Funeral expenses of $26,000 were paid.
Prepare the journal entry to record the transaction.

Question 49

Additional debts of $78,000 were discovered.Debts totaling $130,000 were paid.
Prepare the journal entry to record the transaction.

Question 50

What is the unified transfer credit?

Question 51

Title to the residence was conveyed to Louis Tweed.
Prepare the journal entry to record the transaction.

Question 52

In settling an estate,what is the meaning of the term legacy?

Question 53

What is the difference between an executor and an administrator?

Question 54

What are the four levels of claims in the order of priority of the Uniform Probate Code?

Question 55

What are the three goals of probate laws?

Question 56

REFERENCE: Ref.19_03
During the most recent year,an estate generated income of $26,000: The interest income was conveyed immediately to the beneficiary stated in the decedent's will.Dividends of $1,560 were given to the decedent's church.
What would be the taxable income?

Question 57

The executor of the estate of Yelbert Toper recorded the following information:
Assets discovered at death (at fair value):

Debts of $22,100 still remain to be paid.The shares of Dell 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.

Question 58

REFERENCE: Ref.19_03
During the most recent year,an estate generated income of $26,000: The interest income was conveyed immediately to the beneficiary stated in the decedent's will.Dividends of $1,560 were given to the decedent's church.
What amount of federal income tax must be paid?

Question 59

The shares of Kodak were sold for $145,600.
Prepare the journal entry to record the transaction.

Question 60

Cash of $195,000 was conveyed to the appropriate beneficiary.
Prepare the journal entry to record the transaction.

Question 61

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record the property of the estate.

Question 62

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record the collection of the life insurance policy.

Question 63

During the current year,an estate generates the following income amounts: Rental income $10,000,Interest income 4,000,Dividend income 6,000.The rental income is conveyed immediately to the beneficiary stated in the decedent's will.Dividends of $2,000 are donated to the decedent's church.What amount of federal income tax must be paid by the estate?

Question 64

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record payment of $20,000 in funeral expenses.

Question 65

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record the distribution of $4,000 to Anna Lee,an income beneficiary.

Question 66

Administrative expenses of $13,000 were paid.
Prepare the journal entry to record the transaction.

Question 67

An inter vivos trust was created by Isaac Posney.Isaac owned a large department store in Juggins,Utah.Adjacent to the store,Isaac also owned a tract of land that was used as an extra parking lot when the store was having a sale or during the Christmas season.Isaac expected the land to appreciate in value and eventually be sold for an office complex or additional stores.
Isaac placed the land into a charitable lead trust which would hold the land for ten years until Isaac's son would turn 21.At that time,title would be transferred to the son.The store will pay rent to use the land during the interim.The income generated each year from this usage will be given to a local church.The land was currently valued at $416,000.
During the first year of this arrangement,the trustee recorded the following cash transactions:

Required:
Prepare all required journal entries for this trust fund including the entry to create the trust.

Question 68

REFERENCE: Ref.19_05
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.
Prepare a Charge and Discharge Statement for the estate.

Question 69

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record the sales of the Stocks and bonds for $120,000

Question 70

REFERENCE: Ref.19_05
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.
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.

Question 71

REFERENCE: Ref.19_05
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.
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.

Question 72

REFERENCE: Ref.19_05
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.
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.

Question 73

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record ordinary repairs to the rental property of $5,000.

Question 74

REFERENCE: Ref.19_05
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.
Prepare the journal entry to record the payment of the estate's liabilities for debts incurred prior to the decedent's death..