Prepare journal entries for a trust
You serve as the trustee for the Josephine Frederick testamentary income trust. The trust was created by the will of her late husband, John. Under the terms of John’s will, all assets are transferred to the trust to cover living expenses for his spouse. Upon her demise, trust assets will be sold, with the proceeds distributed to their six children. Each is to receive an equal share. The probate court ruled that household furnishings and John’s personal effects could be excluded from the estate. The executor has paid all inheritance and income taxes on estate income for the period of estate administration. The estate inventory prepared by John’s estate executor showed the following assets:
|
Asset |
Cost |
Fair Value |
|
Cash |
$218,220 |
$218,220 |
|
Savings accounts |
300,000 |
300,000 |
|
Microsystems common stock |
163,400 |
400,000 |
|
Big Casino common stock |
181,500 |
120,000 |
|
Vintage sports car |
17,500 |
31,000 |
|
Mountain cottage |
39,700 |
114,500 |
|
Personal residence |
209,900 |
457,500 |
REQUIRED: Prepare the journal entries for the creation of the trust.