Question

2 After the death of Lennie Pope, his will was read. It contained the following provisions: . 66 pints $180,000 in cash goes to decedent's brother, Ned Pope. • Residence and other personal property go to his sister, Sue Pope. • Proceeds from the sale of Ford stock go to uncle, Harwood Pope. • $330,000 goes into a charitable remainder trust. • All other estate assets are to be liquidated with the cash going to Victoria Jones. eBook a. Prepare journal entries for the following transactions that subsequently occur. (1) Discovered the following assets (at fair value): Print $ Cash Certificates of deposit Dividends receivable Life insurance policy Residence and personal effects Shares of Ford Motor Company Shares of Xerox Corporation 28,000 93,000 4,400 520,000 540,000 86,000 93,000 (2) Collected life insurance policy. (3) Collected dividends of $6,800. (4) Discovered debts of $85,000. (5) Conveyed title to the residence to Sue Pope along with the decedent's personal effects. (6) Discovered title to land valued at $29,000. (7) Discovered additional debts of $51,000. Paid all of the debts totaling $136,000. (8) Paid funeral expenses of $45,000. (9) Conveyed cash of $180,000 to Ned Pope. (10) Sold the shares of Ford for $102,000. (11) Paid administrative expenses of $30,000. (12) Made the appropriate payment to Harwood Pope. b. Prepare a charge and discharge statement.

Answer 1

Solution

A) Journal entries for the given transactions

Estate Principal = Cash+certificate of deposit+dividends+life insurance+stock shares+residence & personal effects+Shares of ford motor company+Shares of xerox corporation

=$ 28,000+$93,000+$4,400+$520,000+$540,000+$86,000+$93,000

= $ 13,64,400

Estate Principal = $13,64,400

The journal entry for the discovered assets at their fair values is as shown below

Particulars	Debit	Credit
Cash	$ 28,000
Certificate of deposit	$93,000
Dividend receivable	$4,400
Life Insurance policy	$520,000
Residence & Personal effects	$540,000
Shares of ford motor company	$86,000
Shares of xerox corporation	$ 93,000
Estate Principal		$13,64,400

2) Collected the life insurance policy

Journal entry

Particulars Debit Credit

Cash $ 520,000

Life insurance receivable-payable to estate $520,000

3) Collected dividend of $ 6,800

Cash = $6,800

Dividend receivable = $ 4,400

Estate income = $ 2,400

Journal entry

Particulars Debit Credit

Cash $ 6,800

Dividend receivable    $4,400

Estate Income $ 2,400

4) Discovered debts of $85,000

The discovered debts & liabilities are not recorded until they are received or paid

No entry is required

5) Conveyed title to the residence to sue pope along with the decedents personal effects

  

Particulars Debit Credit

Legacy Sue Pope $ 540,000

Residence & personal effects $ 540,000

6) Discovered title to land value at $ 29,000

Particulars Debit Credit

Land $29,000

Assets subsequently discovered $29,000

7) Discovered additional debts of $ 51,000. Paid all the debts totalling $ 136,000

= $136,000- $ 51,000 = $85,000

No entry recorded of the discovered debt of $ 85,000 as the debts & liabilities are not recorded until they are received or paid.

To record the payment of debts

Particulars Debit Credit

Debts of the decedent $ 136,000

cash $ 136,000

8) Paid funeral expenses of $ 45,000

Particulars Debit Credit

Funeral Expenses    $ 45,000

Cash $ 45,000

9) Conveyed cash of $ 180,000 to Ned Pope

Particulars Debit Credit

Legacy Ned Pope $ 180,000

Cash $ 180,000

10) Sold the shares of ford for $ 102,000

Cash $ 102,000

Investment in ford company = $ 86,000

Gains on sale of investment = $ 16,000 ($ 102,000- $ 86,000)

Particulars Debit Credit

Cash $102,000

Investment in ford company $ 86,000

Gain on sale of investment $ 16,000

11) Paid administrative expense of $ 30,000

Particulars Debit Credit

Administrative Expenses $ 30,000

Cash $ 30,000

12) Made the appropriate payment to Harwood Pope

Particulars Debit Credit

Legacy - Harwood Pope $ 102,000

Cash $ 102,000

In the above, legacy harwood pope = $102,000 (from 10)

b) Prepare a charge & discharge statement

The charge & discharge statement is as shown below

Charge & discharge statement as to principal & income

Charge myself with:

Assets as per original inventory $ 13,64,400 (a)

Assets subsequently discovered   

Land $ 29,000

Gain on sale of ford motor stock $ 16,000

Dividend income $ 2,400 $47,400(b)

Total  charges $ 14,11,800(a+b)

Credit myself with:

Debts & decedent $ 136,000

Funeral & Administrative expenses $ 75,000

Legacy distributed

Sue Pope $ 540,000

Ned Pope $ 180,000

Harwood Pope $ 102,000   

Total credits $ 10,33,000

Balances on hand $ 378,800

($ 14,11,800-$10,33,000)

Estate principal

Cash $161,400 (Calculation given below) (A)

Certificate of deposits $ 93,000 (B)

Land $ 29,000 (C)

Shares to xeros $ 93,000 (D)

Estate Principal $ 376,400 (A+B+C+D)

Cash $ 2,400 (Estate income of dividend)

Note :Cash calculation =$28,000+$4,400+$520,000-$136,000-$45,000-$180,000+$102,000-$30,000-$102,000

=$161,400

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