Deck 15: Estates and Trusts

Question 1

A decedent who leaves no valid will is said to have died intestate.

Answer 1

True

Question 2

Letters testamentary are provisions of a holographic will that must be carried out by the personal representative of the decedent.

Answer 2

False

Question 3

The proceeds from the disposal of shares of common stock received by an estate as a 10% stock dividend are part of the estate principal.

Answer 3

True

Question 4

Homestead and family allowances are distributed to the decedent's family members only after specific devises have been distributed.

Question 5

Generally accepted accounting principles applicable to business enterprises are used in the preparation of a charge and discharge statement for an estate or a trust.

Question 6

The principal of an estate or a trust is reduced by expenditures incurred in preparing real property for sale or rent, extraordinary repairs to principal property, and income taxes on gains from disposal of principal property.

Question 7

Both the Devises Distributed ledger account and the Estate Principal Balance account generally have credit balances in the accounting records of the executor of an estate.

Question 8

The closing entry of an estate generally includes credits to the Property Discovered and Liabilities Paid ledger accounts.

Question 9

The terms income beneficiary and remainderman may be used interchangeably.

Question 10

The Uniform Probate Code and the Revised Uniform Principal and Income Act provide trustees of testamentary trusts with the legal and accounting guidelines for administration of the trusts.

Question 11

The trustee of a trust is not required to submit financial statements for the trust until the trust is terminated.

Question 12

The Revised Uniform Principal and Income Act requires that estate income be charged with a reasonable provision for depreciation.

Question 13

The federal estate tax and state inheritance taxes are apportioned to devisees in accordance with provisions in the decedent's will.

Question 14

Estates and trusts are accounting entities whose income is taxed only when it is distributed to beneficiaries.

Question 15

Estates and trusts are managed by fiduciaries in accordance with the provisions of a will, a trust document, or applicable state statutes.

Question 16

A specific devise in a will of a decedent is:

A) A gift of an identifiable object, such as Casa Calma in Bear Valley Springs
B) A gift of an amount of money
C) A gift such as 100 shares of Gino Company common stock
D) None of the foregoing

Question 17

The Uniform Probate Code's exemption for a decedent's household furniture and furnishings is termed:

A) Homestead allowance
B) Exempt property
C) Family allowance
D) None of the foregoing

Question 18

A cash dividend received by the personal representative of a decedent on common stock included in a general devise is debited to:

A) The Income Cash ledger account
B) Either the Income Cash ledger account or the Principal Cash account
C) The Principal Cash ledger account
D) Neither the Income Cash ledger account nor the Principal Cash account

Question 19

The personal representative of an estate must give first preference to payment of:

A) Decedent's reasonable funeral costs
B) Reasonable and necessary medical and hospital costs of decedent's last illness
C) Debts and taxes with preference under state laws
D) Costs of administering the estate

Question 20

A bequest of $25,000 cash included in a will is:

A) A residuary devise
B) A general devise
C) A monetary devise
D) A specific devise
E) None of the foregoing

Question 21

Which one of the following estate costs is chargeable against income?

A) A reasonable provision for depreciation
B) Extraordinary repairs to estate property
C) Costs of investing in property
D) None of the foregoing

Question 22

Which of the following is included in the "I credit myself as to principal as follows" section of a personal representative's charge and discharge statement for an estate?

A) Distributions of income
B) Inventory
C) Property discovered
D) None of the foregoing

Question 23

The Property Discovered ledger account in the accounting records of an estate most closely resembles:

A) An asset account
B) A liability account
C) An ownership equity account
D) A revenue account
E) None of the foregoing

Question 24

A specific devise in a will of a decedent is:

A) A gift of an identifiable object
B) A gift of an amount of money
C) A gift such as 100 shares of Great Western Company common stock
D) None of the foregoing

Question 25

A closing entry is prepared for a trust:

A) Only when the trust is terminated
B) At the end of each period for which a charge and discharge statement is prepared
C) When deemed necessary by the trustee
D) When ordered by the probate court

Question 26

Under the Uniform Probate Code, a family allowance is:

A) An allowance of a specified amount to the decedent's surviving spouse and minor children who were being supported by the decedent.
B) An aggregate specified value of automobiles, household furniture and furnishings, appliances, and personal effects
C) An allowance of a specified amount
D) None of the foregoing

Question 27

In accounting for an estate, which of the following generally is not considered an acceptable procedure?

A) Use of the modified cash basis of accounting
B) Recording claims against the real property of the decedent on date of death in the accounting records of the estate
C) Deducting funeral costs from income in the computation of the amount to be paid to income beneficiaries
D) None of the foregoing

Question 28

The Richard Tracy Trust was established on January 2, 2006. The trust property included dividends and interest receivable of $3,600. During the first six months, dividends and interest received in cash amounted to $54,000, and expenses chargeable to income were $9,300. In addition, common stocks were disposed of at a gain of $10,200, bonds were disposed of at a loss of $4,050, and shares of Provost Corporation common stock received as a 10% stock dividend were disposed of for $4,830. The income of the trust for the six months ended June 30, 2006, is:

A) $41,100
B) $44,700
C) $47,250
D) $52,080
E) Some other amount

Question 29

Under the Revised Uniform Principal and Income Act, depreciation is:

A) Never provided for
B) Charged to income for all depreciable property except a beneficiary's residence
C) Charged to principal for all depreciable property
D) Allocated between principal and income

Question 30

Items in the inventory of property of a decedent on the date of death must be valued for the estate at:

A) Carrying amount to the decedent
B) Current fair value
C) Historical cost to the decedent
D) Amounts established by the probate court

Question 31

The individual or organization named in a will to administer the decedent's estate is termed the:

A) Executor
B) Personal representative
C) Administrator
D) Trustee

Question 32

Given the following classification of claims of creditors against a decedent's estate whose property is insufficient to pay all claims in full:
(1) Debts and taxes with preference under federal or state laws
(2) Decedent's funeral costs and medical and hospital costs of the decedent's last illness
(3) Costs of administering the estate
(4) All other claims
The personal representative of the estate pays the claims in the following sequence, under the Uniform Probate Code:

A) (1), (2), (3), (4)
B) (3), (2), (1), (4)
C) (3), (1), (2), (4)
D) (1), (3), (2), (4)

Question 33

The following journal entry (explanation omitted) appeared in the general journal of the executor of an estate:
An appropriate explanation for the journal entry is:

A) To record exchange of discovered assets for a savings account
B) To correct erroneous journal entry for discovered assets
C) To record asset owned on date of decedent's death
D) None of the foregoing

Question 34

Among the transactions and events of Ruth James, executor of the estate of Ralph Rogeman, for the month of November, 2006, were the following:

Prepare journal entries (with explanations) for the foregoing transactions and events of Ruth James, executor of the estate of Ralph Rogeman.

Question 35

Among the journal entries prepared by the inexperienced accountant of the Estate of Wade Wallace were the following:
Prepare journal entries on May 31, 2006 to correct the accounting records of the Estate of Wade Wallace. Omit explanations for the entries.

Question 36

Prepare journal entries for the following selected transactions and events of the Estate of Brett Adams, Deceased:

Question 37

The devisees named in the will of Ara Persian, Deceased, and the current fair value of the devisees' equity in the estate, follow:
The federal estate tax and state inheritance taxes attributable to the Estate of Ara Persian totaled $50,400. Assuming the will of Ara Persian, Deceased, is silent as to the apportionment of death taxes, compute the amount of death taxes to be allocated to each devisee.
a. Death taxes allocable to Sarah Persian $__________
b. Death taxes allocable to Jacob Persian $__________
c. Death taxes allocable to Katina Sirabian $__________
d. Death taxes allocable to Glendale Rest Home $__________
e. Death taxes allocable to Church of Armen $__________

Question 38

Franz Josi died on September 15, 2005. Donald Kral, the executor for the estate, prepared the following trial balance on March 31, 2006:
a. Prepare an interim charge and discharge statement for Donald Kral, executor of the estate of Franz Josi, Deceased, on March 31, 2006. Do not prepare supporting exhibits.
b. Prepare a journal entry to close the accounting records of Donald Kral, executor of the estate of Franz Josi, Deceased, on March 31, 2006.

Question 39

The only liabilities included in the journal entry to record the date-of-death inventory of estate property in the accounting records of the personal representative of a decedent are liabilities secured by estate property. Other liabilities of the decedent are recognized by the personal representative when they are paid.
Is the accounting for liabilities of a decedent's estate consistent and logical? Explain.