Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. Henry ODonnell created an inter vivos trust fund. He owns a large department store in Higgins, Utah. He also owns a tract of land

3. Henry ODonnell created an inter vivos trust fund. He owns a large department store in Higgins, Utah. He also owns a tract of land adjacent to the store used as an extra parking lot when the store is having a sale and during the Christmas season. ODonnell expects the land to appreciate in value and eventually be sold for an office complex or additional stores.

ODonnell places this land into a charitable lead trust, which will hold the land for 10 years until ODonnell's son is 21. At that time, title will transfer 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 is currently valued at $470,000.

During the first year of this arrangement, the trustee records the following cash transactions:

Cash inflows:

Rental income

$

75,000

Cash outflows:

Insurance

$

5,500

Property taxes

7,500

Paving (considered an extraordinary repair)

5,500

Maintenance

9,500

Distribution to income beneficiary

45,000

Prepare journal entries for this trust fund including the entry to create the trust. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record transfer of land to charitable trust

No 1

Transaction 1

General Journal

Debit

Credit

Land

?

Trust-principal

?

Record distribution of income to beneficiary

No 8

Transaction 2

General Journal

Debit

Credit

Equity in income: beneficiary

45,000

Cash-income

?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Basics Of IT Audit Purposes Processes And Practical Information

Authors: Stephen D. Gantz

1st Edition

0124171591, 978-0124171596

More Books

Students also viewed these Accounting questions

Question

In Exercises write the expression in algebraic form. sec(arctan 4x)

Answered: 1 week ago

Question

Describe three other types of visual aids.

Answered: 1 week ago