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Prepare required journal entries on the trust fund

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Reference no: EM132767689

Question: Trust Fund Worksheet Background

An inter vivos trust was created by Isaac Posney. Isaac owned a large department store in Juggins, Utah. Adjacent to the store, Isaac also owned a tract of land that was used as an extra parking lot when the store was having a sale or during the Christmas season. Isaac expected the land to appreciate in value and eventually be sold for an office complex or additional stores. Isaac placed the land into a charitable lead trust, which would hold the land for ten years until Isaac's son would turn 21. At that time, title would be transferred 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 was currently valued at $416,000.

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

Cash inflow:

Rental income $78,000

Cash outflows:

Insurance $ 5,200

Property taxes 7,800

Paving (considered an extraordinary repair) 5,600

Maintenance 10,400

Distribution to income beneficiary 39,000

Instructions: Prepare required journal entries on the Trust Fund table for this trust fund including the entry to create the trust.

Land

Trust - Principal

Cash - Income

Trust - Income

Insurance Expense - Income

Cash - Income

Property Taxes Expense - Income

Cash - Income

Land Improvements

Cash - Income

Due from Trust - Principal

Due to Trust - Income

Maintenance Expense - Income

Cash - Income

Equity in Income: Beneficiary

Cash - Income

Reference no: EM132767689

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