Question

James Albemarle created a trust fund at the beginning of 2019. The income from this fund will go to his son Edward. When Edward reaches the age of 25, the principal of the fund will be conveyed to United Charities of Cleveland. Mr. Albemarle specified that 75 percent of trustee fees are to be paid from principal. Terry Jones, CPA, is the trustee.

1. James Albemarle transferred cash of $390,000, stocks worth $290,000, and rental property valued at $195,000 to the trustee of this fund.
2. Immediately invested cash of $305,000 in bonds issued by the U.S. government. Commissions of $7,500 are paid on this transaction.
3. Incurred permanent repairs of $7,900 so that the property can be rented. Payment is made immediately.
4. Received dividends of $5,800. Of this amount, $1,900 had been declared prior to the creation of the trust fund.
5. Paid insurance expense of $2,900 on the rental property.
6. Received rental income of $8,900.
7. Paid $5,800 from the trust for trustee services rendered.
8. Conveyed cash of $5,900 to Edward Albemarle.

Prepare all necessary journal entries for the trust to record the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution-

No	Accounts Titles and Explanations	Debit($)	Credit($)
1.	Cash-principal	390000
	Investment in stocks	290000
	Rental Property	195000
	To Trust Principal		875000
	(Being, Investment in Trust Principal)
2.	Investment in bonds	305000
	To Cash principal		305000
	(Being, Investment in bonds)
3.	Commission expense	7500
	To Cash principal		7500
	(Being, Commission expenses)
4.	Repair expense	7900
	To Cash principal		7900
	(Being, Repair expenses )
5.	Cash-principal	1900
	Cash-income (5800 - 1900)	3900
	To Trust principal		1900
	To Trust income		3900
	(Being, receipt of dividends)
6.	Insurance expense-income	2900
	To cash-income		2900
	(Being, insurance expense on the rental property)
7.	Cash-income	8900
	To Trust income-Rental		8900
	(Being,received rental income)
8.	Trust expense-principal($5800*75%)	4350
	Trust expense-income ($5800 * 25%)	1450
	To Cash- principal		4350
	To Cash-income		1450
	(Being, service amount paid)
9.	Equity income	5900
	To Cash income		5900
	(Being, Cash conveyed to Edward Albemarle)