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CHAPTER 15

ESTATES AND TRUSTS

The title of each problem is followed by the estimated time in minutes required for completion and by a
difficulty rating. The time estimates are applicable for students using the partially filled-in working papers.

Pr. 15–1 Estate of Mildred Young (20 minutes, easy)


Prepare a charge and discharge statement for estate from accounts in a trial balance.
Pr. 15–2 Estate of Pablo Garcia (35 minutes, easy)
Journal entries for estate, including closing entry. Charge and discharge statement for estate
and journal entry to establish the accounting records for testamentary trust.
Pr. 15–3 Estate of Janet Mann (60 minutes, medium)
Prepare a charge and discharge statement for estate, following provisions of the will relating to
activities of executor.
Pr. 15–4 Estate of Frederick Doheny (75 minutes, strong)
Prepare a charge and discharge statement for estate, distinguishing between estate principal
and income. Exhibits supporting various items in the charge and discharge statement also are
required.

ANSWERS TO REVIEW QUESTIONS


1. No, the Uniform Probate Code is not in effect throughout the United States.
2. a. An estate is all the property of a decedent, trust, or other person whose affairs are subject to
the Uniform Probate Code.
b. Intestacy is the absence of a will for a decedent.
c. A testator is a person who creates a will.
d. An executor is the personal representative of a decedent named in the decedent's will.
e. An administrator is the personal representative of an intestate decedent.
f. Letters testamentary are legal documents issued by the probate court to the personal
representative of a decedent as authority to commence administration of the decedent's estate.
g. A devise is a transfer of real or personal property by means of a will.
h. A remainderman is the beneficiary of a trust who receives the principal property at the
termination of the trust.
i. An inter vivos trust is a trust established during the lifetime of the donor.
j. A settlor is the creator of a trust; a settlor also is known as a donor or trustor.
3. Informal probate of a will under provisions of the Uniform Probate Court requires the filing of an
application by an interested party with the probate court. After reviewing the application, the
registrar of the court issues a written statement that makes the will effective. Formal probate is
litigation to determine whether a decedent left a valid will. Formal probate involves court hearings,
appearances by witnesses, and other aspects of formal litigation.
4. The standards of care required of a personal representative are the same as the standards required
of a trustee. Both fiduciaries must meet the standards of care that a prudent person would observe
in managing the property of others.
5. There must be a distinction between principal and income in the administration of an estate
because the income beneficiary of an estate or a testamentary trust often is a different person or
organization from the principal beneficiary of the estate or trust.
6. The exempt property and allowances provisions of the Uniform Probate Code are as follows:

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Solutions Manual, Chapter 15 167
(1) Homestead allowance of a specified amount to the decedent's surviving spouse or surviving
minor and dependent children
(2) Exempt property consisting of a specified aggregate value of automobiles, household furniture
and furnishings, appliances, and personal effects to the decedent's surviving spouse or children
(3) Family allowance in cash not to exceed a specified lump sum, or installments of one-twelfth of
the specified sum a month for one year, during administration of the estate
7. a. Specific devise
b. General devise
c. General devise
d. Specific devise
e. Residuary devise
8. The accrual basis of accounting always is used for the inventory of the decedent's property as of
the date of death, in order to facilitate the distinction between principal and income during the
administration of the estate. There is seldom any other use for the accrual basis of accounting in
the administration of an estate or a trust. However, if the decedent's will or the trust document
requires use of the accrual basis of accounting by the personal representative or the trustee, it must
be used.
9. The Revised Uniform Principal and Income Act requires a charge to estate income for a reasonable
provision for depreciation, computed in accordance with generally accepted accounting principles.
10. The Property Discovered ledger account is used to record the accountability of the personal
representative of the estate for estate property discovered after the original inventory of estate
property has been filed with the probate court.
11. The charge and discharge statement prepared for the personal representative (executor or
administrator) of an estate is wholly unlike the financial statements issued for a business enterprise.
The charge and discharge statement presents the personal representative's accountability for estate
property, and the representative's actions in carrying out that accountability. In contrast, the
financial statements for a business enterprise present the financial position, results of operations,
and cash flows of the enterprise.
12. The journal entries for estates and trusts are similar in that they must show the fiduciaries'
accountability for property of the estate or trust. The journal entries are dissimilar in that an estate
is liquidated rapidly and its affairs completed, while a trust continues its activities for the period
specified in the trust document. Thus, numerous journal entries are made for the investment
activities of a trustee; rarely are there comparable entries for the personal representative of an
estate.

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168 Modern Advanced Accounting, 10/e
SOLUTIONS TO EXERCISES
Ex. 15–1 1. d 8. a
2. a 9. c
3. b 10. a
4. a 11. c
5. c 12. b
6. b 13. d
7. c 14. b

Ex. 15–2 a. Depreciation of building should be charged against trust income, unless the trustor has
indicated that the income beneficiaries are to receive the full cash-basis income of the trust.
b. Legal fees for managing trust property are charged against trust income.
c. Special assessment tax levied on real property for street improvements generally is
considered a capital expenditure and is charged against trust principal. If the tax were
considered to be of primary benefit to the income beneficiaries, it would be charged against
trust income.
d. Interest on mortgage note payable accrued on the date that the trust was created is charged
against trust principal; interest accrued after that date is charged against trust income.
e. Loss on disposal of trust investments is charged against trust principal.
f. Major repairs to real property prior to disposal of the property are charged against trust
principal.
Ex. 15–3 Distribution of property of Estate of Allen Baker, Deceased, Apr. 30, 2006:
Administrative costs (cash) $40,000*
Specific devise to Barbara Baker (Southeastern Airlines 7% bonds) 21,120
General devise to Carl Baker (BBM Company common stock) [($9,900 –
$5,020) x ½] 2,440
General devise to Danielle Baker (BBM Company common stock) [($9,900
– $5,020) x ½] 2,440
Residuary devise to Edie Baker 0
Total estate property $66,000
*Cash in checking account ($13,860), plus cash from matured bank certificate of deposit
($21,120), plus cash from disposal of part of BBM Company common stock ($5,020).

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Solutions Manual, Chapter 15 169
Ex. 15–4 Distribution of devises of Estate of Rhoda Ross, Deceased, Dec. 17, 2006:
Devisee Type of Gross devise Abated Net devise
devise amount amount amount
Leah Ross Specific $ 60,000 $ 60,000
Univ. of Carlin Specific 60,000 60,000
Ward Ross General 27,500* 27,500
Music Center Fund General 50,000† 50,000
Roberta Jones Residuary 27,500* $10,000† 17,500
Totals $225,000 $10,000 $215,000
*$55,000 x 0.50 = $27,500.

$10,000 must be realized from sale of Engle Corporation bonds to provide sufficient cash for the Music
Center Fund devise.
Ex. 15–5 Journal entries for executor of the will of Lincoln Johnson, Deceased:
2006
Dec. 6 Common Stock of Coburn Company 6,000
Property Discovered 6,000
14 Devises Distributed 2,500
Principal Cash 2,500
26 Administrative Costs 1,000
Principal Cash 1,000
31 Liabilities Paid 9,200
Principal Cash 9,200
Ex. 15–6 Journal entries for executor of the will of D. C. Kane, Deceased:
2006
Oct. 20 Principal Cash 88,800
Real Property 148,000
Arriba Company Common Stock 60,000
Carter Corporation Bonds 40,000
Interest Receivable 600
Personal and Household Effects 23,500
Estate Principal Balance 360,900
29 Basin Corporation Common Stock 9,000
Property Discovered 9,000
Nov. 10 Principal Cash 520
Payable to Edward Kane, Devisee 520
15 Liabilities Paid 30,000
Principal Cash 30,000
22 Administrative Costs 3,240
Principal Cash 3,240
29 Principal Cash [($40,000 x 0.94) + $600] 38,200
Income Cash ($1,050 – $600) 450
Loss on Disposal of Principal Property ($40,000 x 0.06) 2,400
Carter Corporation Bonds 40,000
Interest Receivable 600
Interest Revenue 450
(continued)
Nov. 30 Devises Distributed 60,000
Payable to Edward Kane, Devisee 520
Arriba Company Common Stock 60,000
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Principal Cash 520
Ex. 15–7 Correcting journal entries for Lillian Crane, executor of the will of Marion Wilson, May 31,
2006:
2006
May 31 Estate Principal Balance 10,400
Property Discovered 10,400
To correct journal entry for property discovered.
31 Distributions to Income Beneficiaries 800
Distribution Expense 800
To correct journal entry to record distribution of income
cash to residuary devisee.
31 Liabilities Paid 7,400
Accounts Payable 7,400
To correct journal entry to record payment of liabilities.

Ex. 15–8 MARIAN SMITH, EXECUTOR


Of the Will of Howard Jones, Deceased
Charge and Discharge Statement
For Period June 18 through December 18, 2006

First, as to Principal
I charge myself as follows:
Inventory of estate property, June 18, 2006 $150,000
Property discovered 20,000
Gain on disposal of principal property 1,000 $171,000
I credit myself as follows:
Liabilities paid $ 40,000
Devises distributed 125,000
Administrative costs 6,000 171,000
Balance, Dec. 18, 2006 $ -0-

Second, as to Income
I charge myself as follows:
Interest revenue $ 10,000
Dividend revenue 15,000 $ 25,000
I credit myself as follows:
Distributions of income 25,000
Balance, Dec. 18, 2006 $ -0-

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Solutions Manual, Chapter 15 171
Ex. 15–9 BARBARA COLEMAN, EXECUTOR
Of the Will of Robert Kaplan, Deceased
Charge and Discharge Statement
For Period August 10, 2005, through February 10, 2006
First, as to Principal
I charge myself as follows:
Inventory of estate property, Aug. 10, 2005 $117,000
Property discovered 1,800
Gain on disposal of principal property 1,200 $120,000
I credit myself as follows:
Administrative costs $ 3,000
Liabilities paid 24,500
Devises distributed 66,500 94,000
Balance, Feb. 10, 2006 (principal cash) $ 26,000

Second, as to Income
I charge myself as follows:
Interest revenue $ 3,590
I credit myself as follows:
Distributions to income beneficiaries $ 2,000
Expenses chargeable to income 1,100 3,100
Balance, Feb. 10, 2006 (income cash) $ 490
Ex. 15–10 Closing entry for executor of will of William Wardlow, Deceased, June 30, 2006:
Estate Principal Balance 324,484
Property Discovered 36,000
Interest Revenue 110
Dividend Revenue 3,000
Loss on Disposal of Principal Property 274
Liabilities Paid 7,844
Devises Distributed 347,366
Administrative Costs 5,000
Distributions to Income Beneficiaries 3,110
To close estate of William Wardlow in accordance with Probate
Court authorization.
Ex. 15–11 a. Journal entries for executor of will of Gina Adams, Deceased, June 30, 2006:
Devises Distributed 220,000
Distributions to Income Beneficiaries 6,750
Principal Cash 115,000
Income Cash 6,750
Marketable Securities 105,000
To record distribution of residuary devise to trustee.
Estate Principal Balance 265,000
Property Discovered 13,000
Gain on Disposal of Principal Property 12,000
Interest Revenue 4,000
Dividend Revenue 4,500
Administrative Costs 5,400
Liabilities Paid 16,000
Devises Distributed 268,600
Distributions to Income Beneficiaries 6,750
Expenses Chargeable to Income 1,750
To close accounting records of estate.
b. Journal entry for trustee, June 30, 2006:
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Principal Cash 115,000
Income Cash 6,750
Marketable Securities 105,000
Trust Principal Balance 220,000
Trust Income Balance 6,750
To open accounting records of trust.
Ex. 15–12 Closing entry for Wilson Woodrow Trust, Apr. 30, 2006:
Trust Principal Balance 1,700
Trust Income Balance 1,200
Interest Revenue 1,600
Administrative Costs 1,700
Distributions to Income Beneficiary 2,000
Expenses Chargeable to Income 800
To close nominal accounts of trust.

CASES
Case 15–1 Carl Roberts's partners should not approve Roberts's serving as executor of the Hopps' wills
and trustee of the Hopps’ trusts. If Roberts acted in those capacities, despite the propriety of
his activities in those roles, he and his partners would benefit financially from the fees he
generated as executor and trustee. Such a benefit would constitute a conflict of interest. The
ethics codes of the IMA and AICPA specifically prohibit conflicts of interest by their members,
as do many state board of accountancy rules. Perhaps Roberts might advise Albert Hopp to
select a bank trust department to serve as executor and trustee, with the proviso that the
department retain Roberts & Webb, LLP for tax services for the estate and trust.
Case 15–2 a. (1) Sand Company 12% bonds due June 16, 2016, at current fair value, and interest
accrued to April 16, 2006, constitute principal property. Any interest earned and
received after April 16, 2006, constitutes income of the estate. The amounts to be
included in an inventory of estate property on the date of Mary Carr's death are as
follows:
Current fair value of bonds $103,500
Accrued interest to April 16, 2006 ($100,000 x 0.12 x 4/12) 4,000
(2) Palko Corporation common stock and dividend of $1 a share declared payable to
stockholders of record April 14, 2006, are principal property. Any dividends declared
subsequently, and before final settlement of the estate or distribution of the stock in the
residuary devise, would be income of the estate. Both the common stock of Palko and
the $5,000 dividend receivable are included in the inventory of estate property, with
the stock valued at the current fair value of $68,000 on April 16, 2006.
(3) Palko Corporation 8%, $100 par, cumulative preferred stock is principal property at
the current fair value of $97,500 on April 16, 2006. No dividend is included as
principal because it had not been declared as of the date of Carr's death. Any
subsequent declarations and payments of dividends would be income of the estate until
such time as the stock is distributed to the residuary devisee and the estate is closed.
b. If there were dividends in arrears on the Palko Corporation 8%, $100 par, cumulative
preferred stock, the answer in a might have to be changed with respect to dividend
declarations subsequent to April 16, 2006. Extraordinary dividends are handled in various
ways under state laws. The general principle to be followed is that the estate principal
should be maintained. When the dividends in arrears are declared and paid, allocation
between principal and income is made based on laws that apply in a specific state.
Case 15–3 The 10,000 shares of MP Company common stock transferred to the trust constitute the
principal of the trust and are held for the remainderman.

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Solutions Manual, Chapter 15 173
The casualty insurance premiums should be divided between trust principal and trust income.
The premium on insurance to cover loss of the facilities should be charged against principal
because it will provide protection to the remainderman by insuring the property for losses by
fire, windstorm, or other casualty. The insurance premiums that provide for continuity of
income during periods when the productive property is inoperable as a result of a casualty are
charged against income because these expenditures are made for the benefit of the income
beneficiary.
Receipts from the insurance company following the casualty loss should be divided between
trust principal and trust income. Amounts received because of the loss of the facilities should
be treated as principal. Amounts received because of loss of income should be considered
income.
The distribution of the common stock of Monte Oil Corporation is analogous to a cash
distribution. If the dividend is declared after the trust is established, the dividend is treated as
income and should be considered as having been received for the benefit of the income
beneficiary. If the dividend is considered to be an extraordinarily large distribution, the
question arises as to whether the dividend is in fact income. If under state law this dividend
were interpreted to be an extraordinarily large one, a large portion or all of it might be treated
as principal.
The stock split and the proceeds from the subsequent disposal of MP Company common stock
are transactions involving the principal of the trust. A stock split does not result in the
distribution of any of MP Company's assets and is not considered income to the recipient;
instead, the number of shares representing a specified ownership interest is increased. The gain
from the disposal of the dividend shares does not constitute income to the trust because trust
assets are considered in terms of physical properties rather than in terms of economic value.
Thus, the cash received from the disposal of MP Company common stock is treated as trust
principal because the cash replaces the stock. The gain is recorded as part of trust principal.
Case 15–4 (l) Attributed solely to principal. This item was property of the decedent at the time of death
and subsequently was converted to cash.
(2) Attribute solely to principal. The decedent was entitled to receive this dividend before
death because the right to receive a dividend accrues to the stockholder on the date of
record.
(3) Attributed solely to principal. Principal property was used to acquire the bonds. This
transaction is an exchange of principal cash for other principal property.
(4) Attributed solely to principal. The right to receive the additional shares of common stock
vested in the decedent on January l5, 2006; therefore, the stock is part of principal. Stock
dividends are not a source of income, regardless of when declared or received.
(5) Allocated between principal and income. The portion of the interest due on the date of
the decedent's death is charged against principal, and the portion accrued since that date is
charged against income.
(6) Attributed solely to principal. Costs of decedent's last illness and funeral costs are
chargeable against principal.
(7) Attributed solely to income. The dividend was declared after the decedent's death, and
the date of record also was after that date. The dividend, therefore, is income of the estate.
(8) Attributed solely to beneficiaries (devisees). Revenue and expenses arising from or
caused by the ownership of real property that has been devised to a specific devisee are
attributed solely to that devisee.
(9) Attributed solely to beneficiaries (devisees). Same reason as in (8) above.
(10) Attributed solely to principal. Taxes on income earned by the decedent prior to the date
of death are charged against principal.

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174 Modern Advanced Accounting, 10/e
20 Minutes, Easy
Estate of Mildred Young Pr. 15–1
Michael Synn, Executor
Of the Will of Mildred Young, Deceased
Charge and Discharge Statement
For Period June 5 through December 31, 2006
First, as to Principal
I charge myself as follows:
Inventory of estate property, June 5, 2006 $ 6 0 0 0 0 0
Property discovered 1 6 8 0 0
Gains on disposal of principal property 2 2 0 0 $ 6 1 9 0 0 0

I credit myself as follows:


Liabilities paid $ 3 6 2 0 0
Administrative costs 1 0 0 0 0
Devises distributed 1 5 0 0 0 6 1 2 0 0
Balance, Dec. 31, 2006 (Exhibit 1) $ 5 5 7 8 0 0

Second, as to Income
I charge myself as follows:
Dividend revenue $ 1 4 2 0 0
Interest revenue 1 8 5 0 0 $ 3 2 7 0 0

I credit myself as follows:


Expenses chargeable to income $ 7 2 0
Distributions to income beneficiaries 1 8 9 8 0 1 9 7 0 0
Balance, Dec. 31, 2006 (Income cash) $ 1 3 0 0 0

Exhibit 1—Principal property, Dec. 31, 2006:


Principal cash $ 2 5 7 0 0
Investments in bonds 2 6 8 3 0 0
Investments in common stocks 2 2 4 3 0 0
Household effects 3 9 5 0 0
Total principal property, Dec. 31, 2006 $ 5 5 7 8 0 0

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Solutions Manual, Chapter 15 175
35 Minutes, Easy
Estate of Pablo Garcia Pr. 15–2
a. Mark Castro, Executor
Of the Will of Pablo Garica, Deceased
Journal Entries for 2006
Principal Cash 4 4 4 4 0
Certificate of Deposit at Standard Savings Bank 1 0 0 0 0 0
Interest Receivable on Certificate of Deposit 1 1 0 0
Personal Effects 1 3 2 0 0
Automobile 2 8 0 0
Investment in Common Stocks 7 7 0 0 0
Estate Principal Balance 2 3 8 5 4 0
To record inventory of estate property owned by
decedent on date of death.

(1) Principal Cash 6 2 9 0


Property Discovered 6 2 9 0
To record discovery of savings account in decedent.

(2) Administrative Costs 5 2 0 0


Principal Cash 5 2 0 0
To record payment of administrative costs.

(3) Principal Cash 2 6 0 2 0


Investment in Common Stocks 2 0 0 0 0
Gain on Disposal of Principal Property 6 0 2 0
To record disposal of common stock.

(4) Devises Distributed 1 6 0 0 0


Personal Effects 1 3 2 0 0
Automobile 2 8 0 0
To record distribution of devise to Manuel Montejano.

(5) Principal Cash 1 1 0 0


Income Cash 5 5 0 0
Interest Receivable on Certificate of Deposit 1 1 0 0
Interest Revenue 4 1 0 0
Dividend Revenue 1 4 0 0
To record income and receipt of interest of $1,100
accrued on date of death on certificate of deposit.

(6) Distributions to Income Beneficiaries 5 5 0 0


Income Cash 5 5 0 0
To record distribution of income to Manuel Montejano.

(7) Liabilities Paid 8 0 5 0


Principal Cash 8 0 5 0
To record payment of liabilities of decedent.

(8) Estate Taxes Paid 3 2 0 0 0


Principal Cash 3 2 0 0 0
To record payment of estate taxes.
(Continued on page 434.)

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176 Modern Advanced Accounting, 10/e
Estate of Pablo Garcia (continued) Pr. 15–2
Mark Castro, Executor
Of the Will of Pablo Garcia, Deceased
Journal Entries for 2006 (concluded)
(9) Estate Principal Balance 2 3 8 5 4 0
Property Discovered 6 2 9 0
Interest Revenue 4 1 0 0
Dividend Revenue 1 4 0 0
Gain on Disposal of Principal Property 6 0 2 0
Principal Cash 3 2 6 0 0
Certificate of Deposit at Standard Savings
Bank 1 0 0 0 0 0
Investment in Common Stocks 5 7 0 0 0
Administrative Costs 5 2 0 0
Devises Distributed 1 6 0 0 0
Liabilities Paid 8 0 5 0
Estate Taxes Paid 3 2 0 0 0
Distributions to Income Beneficiaries 5 5 0 0
To close accounting records for estate and to transfer
property of $189,600 ($32,600 + $100,000 + $57,000
= $189,600) to Manuel Montejano Trust.

b. Mark Castro, Executor


Of the Will of Pablo Garcia, Deceased
Charge and Discharge Statement
For Period March 1 through December 10, 2006
First, as to Principal
I charge myself as follows:
Inventory of estate property, Mar. 1, 2006 $ 2 3 8 5 4 0
Property discovered 6 2 9 0
Gain on disposal of principal property 6 0 2 0 $ 2 5 0 8 5 0

I credit myself as follows:


Administrative costs $ 5 2 0 0
Devises distributed 1 6 0 0 0
Liabilities paid 8 0 5 0
Estate taxes paid 3 2 0 0 0
Transfer of property to Manuel Montejano
Trust 1 8 9 6 0 0 2 5 0 8 5 0
Balance, Dec. 10, 2006 - 0 -

Second, as to Income
I charge myself as follows:
Interest revenue $ 4 1 0 0
Dividend revenue 1 4 0 0 $ 5 5 0 0

I credit myself as follows:


Distributed to income beneficiaries 5 5 0 0
Balance, Dec. 10, 2006 $ - 0 -

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Solutions Manual, Chapter 15 177
Estate of Pablo Garcia (concluded) Pr. 15–2
c. Manuel Montejano Trust
Journal Entry
December 10, 2006
Principal Cash 3 2 6 0 0
Certificate of Deposit at Standard Savings Bank 1 0 0 0 0 0
Investment in Common Stocks 5 7 0 0 0
Trust Principal Balance 1 8 9 6 0 0
To open accounting records of Manuel Montejano
Trust.

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178 Modern Advanced Accounting, 10/e
60 Minutes, Medium
Estate of Janet Mann Pr. 15–3
Dudley Mann, Executor
Of the Will of Janet Mann, Deceased
Charge and Discharge Statement
For Period May 31, 2006, through July 1, 2007
First, as to Principal
I charge myself as follows:
Inventory of estate property, May 31, 2006 (Exhibit 1) $ 6 5 3 3 0 0
Gain on settlement of devise (Exhibit 2) 4 0 0 $ 6 5 3 7 0 0

I credit myself as follows:


Liabilities paid $ 1 2 0 0 0
Additional prior years’ federal and state income taxes, plus interest 1 8 1 0
Income taxes of decedent for 2006 9 1 0 0
Estate and inheritance taxes 4 3 0 0 0
Attorney’s and accountant’s fees 2 5 0 0 0
Devises distributed (Exhibit 3) 2 6 9 9 0 0
Loss on disposal of principal property (Exhibit 4) 1 1 9 0 3 6 2 0 0 0

Balance, July 1, 2007 (Exhibit 5) $ 2 9 1 7 0 0

Second, as to Income
I charge myself as follows:
Income collected (Exhibit 6) $ 2 3 0 0 0
Income accrued, July 1, 2007 (Exhibit 7) 8 0 0 0 $ 3 1 0 0 0

I credit myself as follows:


Federal and state fiduciary income taxes $ 2 4 0 0
Distributions of income ($1,500 x 13) 1 9 5 0 0 2 1 9 0 0

Balance, July 1, 2007 (Exhibit 8) $ 9 1 0 0

Exhibit 1—Inventory of estate property, May 31, 2006:


Personal residence $ 2 4 5
0 0 0
Jewelry—diamond ring 1 4
6 0 0
City National Bank checking account 4 3
0 0 0
U.S. Treasury 12% bonds ($200,000 face amount) 2 0 0
0 0 0
Accrued interest on U.S. Treasury 12% bonds 6
0 0 0
Sonar Corporation 9% bonds ($10,000 face amount) 9
9 0 0
Permian Company common stock, 800 shares 6 4
0 0 0
Dividend receivable from Permian Company 8 0 0
Roe Company common stock, 700 shares 7 0 0 0 0
Total $ 6 5 3 3 0 0

(Continued on page 437.)

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Solutions Manual, Chapter 15 179
Estate of Janet Mann (concluded) Pr. 15–3
Dudley Mann, Executor
Of the Will of Janet Mann, Deceased
Charge and Discharge Statement (concluded)
For Period May 31, 2006, through July 1, 2007
Exhibit 2—Gain on settlement of devise:
Cash bequest to Dudley Mann $ 1 5 0 0 0
Less: Inventory value of diamond ring accepted in lieu of cash 1 4 6 0 0
Gain on settlement of devise $ 4 0 0

Exhibit 3—Devises distributed:


Personal residence, George Mann $ 2 4 5 0 0 0
Diamond ring in lieu of cash devise, Dudley Mann 1 5 0 0 0
Sonar Corporation 9% bonds, Eleanor Mann 9 9 0 0
Total $ 2 6 9 9 0 0

Exhibit 4—Loss on disposal of principal property:


Inventory value of Roe Company common stock $ 7 0 0 0 0
Less: Proceeds on disposal of Roe Company common stock 6 8 8 1 0
Loss on disposal of principal property $ 1 1 9 0

Exhibit 5—Estate principal balance, July 1, 2007:


Principal cash (See below*) $ 2 7 7 0 0
U.S. treasury 12% bonds 2 0 0 0 0 0
Permian Company common stock 6 4 0 0 0
Total $ 2 9 1 7 0 0

Exhibit 6—Income collected:


U.S. Treasury 12% bonds ($24,000 – $6,000) $ 1 8 0 0 0
Permian Company common stock 5 0 0 0
Total $ 2 3 0 0 0

Exhibit 7—Income accrued, July 1, 2007:


U.S. Treasury 12% bonds ($200,000 x 0.12 x 4/12) $ 8 0 0 0

Exhibit 8—Balance of income:


Income cash ($23,000 – $21,900) $ 1 1 0 0
Accrued interest on U.S. Treasury 12% bonds 8 0 0 0
Total $ 9 1 0 0

* Cash in inventory, May 31, 2006 $ 4 3 0 0 0


Add: Proceeds on disposal of Roe Company common stock 6 8 8 1 0
Accrued interest on May 31, 2006 6 0 0 0
Dividend receivable from Permian Company on May 31, 2006 8 0 0
Subtotal $ 1 1 8 6 1 0
Less: Liabilities paid $ 1 2 0 0 0
Additional prior years’ federal and state income taxes, plus interest 1 8 1 0
Income taxes of decedent for 2006 9 1 0 0
Estate and inheritance taxes 4 3 0 0 0
Attorney’s and accountant’s fees 2 5 0 0 0 9 0 9 1 0
Principal cash balance, July 1, 2007 $ 2 7 7 0 0

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180 Modern Advanced Accounting, 10/e
75 Minutes, Strong
Estate of Federick Doheny Pr. 15–4
Richard Cordes, Executor
Of the Will of Frederick Doheny, Deceased
Charge and Discharge Statement
For Period February 1 through December 31, 2006
First, as to Principal
I charge myself as follows:
Inventory of estate property, Feb. 1, 2006 (Exhibit 1) $ 4 4 5 1 0 0
Gain on disposal of principal property (Exhibit 2) 5 0 0 0 $ 4 5 0 1 0 0

I credit myself as follows:


Administrative costs (Exhibit 3) $ 1 6 9 7 5
Liabilities paid (Exhibit 4) 4 4 2 5
Devises distributed (Exhibit 5) 1 9 8 7 0 0 2 2 0 1 0 0

Balance, Dec. 31, 2006 (Exhibit 6) $ 2 3 0 0 0 0

Second, as to Income
I charge myself as follows:
Receipt of income (Exhibit 7) $ 1 2 3 0 0

I credit myself as follows:


Expenses chargeable to income (Exhibit 8) $ 4 5 0 0
Distribution of income—United Charities ($12,300 – $4,500 – $500) 7 3 0 0 1 1 8 0 0

Balance, Dec. 31, 2006 (income cash) $ 5 0 0

Exhibit 1—Inventory of estate property, Feb. 1, 2006:


Union Bank checking account $ 3 3 5 0 0
Sun City bonds, $60,000 face amount, 12% interest rate 5 9 0 0 0
Ron Corp, common stock, 2,000 shares 2 2 0 0 0 0
Term life insurance policy 2 0 0 0 0
Residence ($86,500) and furniture ($23,500) 1 1 0 0 0 0
Dividends receivable on Ron Corp., common stock (declared Jan. 14,
2006) 2 0 0 0
Accrued interest on Sun City bonds ($60,000 x 0.12 x 1/12) 6 0 0
Total inventory of estate property $ 4 4 5 1 0 0

Exhibit 2—Gain on disposal principal property:


Gain on disposal of 1,000 shares of Ron Corp. common stock
($105,000 – $100,000*) $ 5 0 0 0

Exhibit 3—Administrative costs:


Attorney’s and accountant’s fees ($20,000 – $3,025) $ 1 6 9 7 5

* Current fair value of Ron Corp. common stock, Feb 1, 2006 $ 2 2 0 0 0 0


Number of shares after July 1, 2006, stock dividend 2 2 0 0
Carrying amount per share ($220,000 ÷ 2,200) $ 1 0 0
Carrying amount of 1,000 shares sold (1,000 x $100) $ 1 0 0 0 0 0

(Continued on page 439.)

The McGraw-Hill Companies, Inc., 2006


Solutions Manual, Chapter 15 181
Estate of Federick Doheny (concluded) Pr. 15–4
Richard Cordes, Executor
Of the Will of Frederick Doheny, Deceased
Charge and Discharge Statement (concluded)
For Period February 1 through December 31, 2006
Exhibit 4—Liabilities paid:
Funeral costs and costs of final illness $ 3 5 0 0
Balance due on 2005 income taxes 7 0 0
Part-time gardener, month of January, 2006 1 2 5
Property taxes, month of January ($1,200 x 1/12) 1 0 0
Total liabilities paid $ 4 4 2 5

Exhibit 5—Devises distributed (United Charities):


Proceeds ($59,000) and accrued interest of $600 on Sun City bonds
to Feb 1, 2006 $ 5 9 6 0 0
Proceeds on Ron Corp. common stock distributed in September 1 0 5 0 0 0
Cash paid in December 3 4 1 0 0 (1)
Total devises distributed (United Charities) $ 1 9 8 7 0 0
Exhibit 6—Estate principal balance, Dec. 31, 2006:
Ron Corp. common stock, 1,200 shares $ 1 2 0 0 0 0
Residence ($86,500) and furniture ($23,500) 1 1 0 0 0 0
Estate principal balance, Dec. 31, 2006 $ 2 3 0 0 0 0

Exhibit 7—Receipt of income:


Interest on Sun City bonds ($60,000 x 0.12 x 5/12) $ 3 0 0 0
Dividends on Ron Corp. common stock, $1 a share 1 2 0 0
Rent, 9 months at $900 a month 8 1 0 0
Total income received $ 1 2 3 0 0

Exhibit 8—Expenses chargeable to income:


Attorney’s and accountant’s fees $ 3 0 2 5
Property taxes, 11 months at $100 a month 1 1 0 0
Part-time gardener, 3 months at $125 a month 3 7 5
Total expenses chargeable to income $ 4 5 0 0

(1) Cash in inventory, Feb. 1, 2006 $ 3 3 5 0 0


Add: Dividends and interest receivable on Feb. 1, 2006 2 6 0 0
Proceeds on term life insurance 2 0 0 0 0
Subtotal $ 5 6 1 0 0
Less: Administrative costs (Exhibit 3) $ 1 6 9 7 5
Liabilities paid (Exhibit 4) 4 4 2 5
Accrued interest on Sun City bonds paid to United Charities 6 0 0 2 2 0 0 0
Principal cash distributed in December $ 3 4 1 0 0

The McGraw-Hill Companies, Inc., 2006


182 Modern Advanced Accounting, 10/e