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Instructions

Please submit an excel document containing your answers to the following questions (to make it easier on you, I attached a file labeled assignment week 6. Please use that file)

Understanding the issues questions 20-1, 20-2, & 20-3, Exercise 20-2, Exercise 20-4, & Problem 20-4.

ASSIGNMENT INSTRUCTIONS
Your week seven assignment includes four questions which you will find in the following tabs.
Before you begin working on the assignment, I suggest that you create a folder for all of your
Advance Accounting 2 assignments in the Documents folder. You might want to name this folder “AC 426 folder.”
After you open this file, please save the entire file to your AC 426 folder.
IF YOU OPEN THE FILE AND BEGIN WORKING WITHOUT SAVING YOU WILL
LOSE YOUR WORK! Excel files are embedded web pages and your work will be lost if
you do not SAVE the file first!
Be sure to submit the entire file in the assignment upload area! Please do not try to save
and send the tabs separately!
Understanding the Issues Questions
Please answer the following questions
20-1. Estate planning is becoming more important to many individuals.
Identify several goals of estate planning.
20-2. Explain why it may be wise for a wealthy spouse to use the unified credit rather
all of their estate to the surviving spouse in the form of the marital exclusion.
20-3. Explain why it is important to separately account for the principal and income o
what happens if such assets are not adequate to satisfy demonstrative or general leg
unified credit rather than to transfer
ncipal and income of an estate and
EXERCISE 20-2
1-
2-
3-
4-

5-
EXERCISE 20-4
Principa
Income
$ 803,000
$ 24,000
Assets received:
Personal residence
Cash
Securities
Personal effects
Sailboat
Loss on realization of securities
Bond interest
Dividends
Total
Assets disbursed:
Amount conveyed to Sierra Club
Mortgage principal
Mortgage interest
Funeral and administrative fees
Medical expenses
Income taxes
Real estate taxes, interest, and penalties
Residence utilities and repairs
Repair of roof and lawn care
Yacht club dues and charges
Total
$ (310,600) $ (17,800)
Balance before distributions/transfers
Amount (80%) paid out to Margaret
Amount (20%) transferred to corpus
Ending balances
$ 493,640

Problem 20-4
Gross estate:
Less allowable deductions:
Taxable estate
Estate tax [$780,800 + (45% × $3,300,000)]
Less unified credit
Net estate tax
Available cash to satisfy general legacies:
Excess amount realized on Buffalo County hunting land
General legacies as set forth in will:
Amount due eight grandchildren
Unsatisfied demonstrative legacies that constitute a general legacy:
Not satisfied by Wachovia Securities account for brother Thomas
Total needed to satisfy general legacies
General legacies can be satisfied at the rate of 70.8% ($1,416,000/$2,000,000)
and are satisfied as follows:
Amount due eight grandchildren (allocated equally)
Problem 20-4
Gross estate:
Rug and pottery collection
Personal residence
Brokerage account at Wachovia Securities
Brokerage account at Schmidt Investment Services
Antique pistol collection
Buffalo County hunting land
Life insurance proceeds
All other assets
Total
ess allowable deductions:
Deductions excluding charitable donations
Donation to Museum of Northern New Mexico
Donation to First Church of Brookfield
Total
Taxable estate
Estate tax [$780,800 + (45% × $3,300,000)]
ess unified credit
Net estate tax
Available cash to satisfy general legacies:
Excess amount realized on Buffalo County Hunting land
Excess insurance policy proceeds
Liquidated value of other assets
Subtotal
Less: Allowable deductions excluding charitable contributions
Net estate tax
Total cash available to satisfy general legacies
General legacies as set forth in will:
Amount due eight grandchildren
Amount due three children
Unsatisfied demonstrative legacies that constitute a general legacy:
Not satisfied by Wachovia Securities account for brother Thomas
Not satisfied by Schmidt Investment Services account for two sisters
Total needed to satisfy general legacies
General legacies can be satisfied at the rate of 70.8% ($1,416,000/$2,000,000)
and are satisfied as follows:
Amount due eight grandchildren (allocated equally)
Amount due three children (allocated equally)
Amount due brother Thomas
Amount due two sisters (allocated equally)
Total
$
6,355,000
$
$
555,000
5,800,000
184,000
1,600,000
1,416,000
1,416,000
2,000,000
2,000,000
1,416,000
1,416,000

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