Question: You have been hired as trustee for
You have been hired as trustee for the testamentary trust created by the will of Jimmy Olson. The trust is created on July 22, 2015. (Use the information provided in P 23-1.)
The trust initially invests the proceeds from the estate in a checking account that pays 3 percent per year. Interest is paid monthly. On July 23, the trust invests $300,000 in a certificate of deposit at Metropolis National Bank. The certificate earns 6 percent interest per year, paid monthly. On July 25, the trust invests $500,000 in the Super Stock Mutual Fund. On July 31, the trust invests $100,000 in 10-year, 10 percent Smallville Municipal Bonds, which will mature on July 31, 2023. The bonds pay interest semiannually on January 31 and July 31. On August 22, you receive a check for $1,500, representing one month’s interest on the certificate of deposit. On August 23, you receive the statement on the checking account indicating a deposit of $405 for one month’s interest on the checking account. The statement also indicates the bank’s monthly fee of $100 for maintaining the trust. On August 31, you send a check to Lois Olson for $3,700 to cover her monthly living expenses.
REQUIRED:
Prepare the entry to record the creation of the Olson trust on July 22. Prepare all additional required entries to account for trust activities through August 31.
Information from P 23-1
Jimmy Olson died on June 15, 2015, at the age of 75, after a brief illness. Jimmy is survived by his wife, Lois, and two adult sons, Clark and Kent. Jimmy left a valid will, requesting that Clark serve as executor of his estate. Jimmy’s widow will maintain the family residence, which was owned jointly.
Jimmy’s will provided the following specific devises:
2014 Corvette to his son, Clark............................................................................. $35,000
Summer cottage on Lake Michigan to his son Kent .............................................40,000
Stock investments to be shared equally between his two sons .........................400,000
Miscellaneous personal effects to his widow, Lois......................................................... —
Jimmy’s will also provided the following general devises of cash:
Clark—to cover executor’s services...................................................................... $5,000
Ms. Lana Lang, Jimmy’s personal trainer......................................................... 200,000
Jimmy’s church...................................................................................................... 50,000
The local symphony orchestra............................................................................... 50,000
Jimmy’s will further provides that Lois should receive any excess of income over expenses during the administration of his estate. All remaining assets are to be placed in a trust to support Lois for the remainder of her lifetime. Upon Lois’s death, the remainder of the estate is to be divided equally between Clark and Kent.
Clark filed notice of his appointment as executor on June 25 and placed the required notice to potential creditors in The Daily Planet, the local newspaper. Clark prepared and filed the following estate inventory with the probate court on July 15:
The following events occurred during June and July 2015:
June 22 Received a check in the amount of $15,000, representing interest on the certificates
of deposit, including the amount accrued at the date of death.
June 24 Received a dividend check in the amount of $12,000.
June 30 Paid $250 to repair a roof leak on the Lake Michigan cottage.
July 4 Paid $4,900 in funeral expenses for Jimmy.
July 12 Cashed out the certificate of deposit for $501,300. The additional $1,300
represented interest income from June 23 through July 12. The bank waived the fees
for early withdrawal because Jimmy had been a loyal, long-term customer.
July 15 Filed the estate inventory with the probate court.
July 20 Distributed the general property devises as provided in Jimmy’s will.
July 21 Distributed the general cash devises as provided in Jimmy’s will.
July 22 Closed the accounts, finalizing the estate administration, paid remaining estate
income to Lois, and transferred remaining estate assets to Lois Olson testamentary
income trust.
Transcribed Image Text:
Jimmy Olson, Testator Inventory of Estate Assets As of the Date of Death on June 15, 2015 Submitted by Clark Olson, executor, on July 15 Property Description Fair Value Cash checking and savings accounts in Metropolis National Bank Certificate of deposit (6 percent, 36 months, matures December 31) (includes $5,000 accrued interest) Stocks held by Perry White brokerage $750,000 505,000 460,000 Dividends receivable on stocks 12,000 40,000 Lake Michigan cottage 2014 Corvette 35,000 Personal effects* $1,802,000
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