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Bcom 417: Trust And Executorship Accounting Ii Question Paper
Bcom 417: Trust And Executorship Accounting Ii
Course:Bachelor Of Commerce
Institution: Chuka University question papers
Exam Year:2013
CHUKA
UNIVERSITY
UNIVERSITY EXAMINATIONS
FOURTH YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF COMMERCE
BCOM 417: TRUST AND EXECUTORSHIP ACCOUNTING II
STREAMS: BCOM Y4S1 TIME: 2 HOURS
DAY/DATE: TUESDAY 13/8/2013 2.30 P.M. – 4.30 P.M.
INSTRUCTIONS:
Answer question one and any other two questions.
Do not write on the question paper.
Question One
(a) Martin died intestate leaving a net estate of Sh.5 million. He was survived by a son Morris and a grandson Paul, the son of a deceased daughter Hellen.
The late Martin had done the following advancements during his lifetime.
Sh.
To Morris 600,000
To Paul 750,000
To Hellen 400,000
Required:
Statement showing how the estate of the late Martin would be distributed. [8 marks]
(b) Briefly explain the different types of legacies. [6 marks]
(c) Briefly explain the meaning of the following terms used in law of succession.
(i) Testatrix [2 marks]
(ii) Partial intestacy [2 marks]
(iii) Codicil [2 marks]
(iv) Presumption of survivorship [2 marks]
(d) Roy Kamau died on 1 May 2012 after a long illness. He was 46 years old at the time of his death and had a written will. The will contained the following four legacies among others;
1. To my daughter Betty, my house in Syokimau
2. To my son, Car
3. To my friend Peter Chege, 2,000 shares in SGL Ltd.
4. To my dear wife Loise, the residue of my estate, subject to her not being married to another person.
Roy Kamau had two sons namely; John and Erick. He owned two saloon cars; a Mercedes Benz and a Toyota Probox. Peter Chege was involved in an accident on 20 April 2011 and died instantly. Loise who was the wife to the late Roy Kamau married a widower, John Mwangi on 15 March 2013.
Required:
As the executor of the estate of the late Roy Kamau, justify how you would deal with each of the four legacies. [8 marks]
Question Two
(a) Define a private trust in the context of Trust law. [2 marks]
(b) Explain the categories of Investment permitted under Trust Law (Cap 167).
. [6 marks]
(c) The will of Alex Njoroge, who died on 23 January 2004, contains the following
provisions:
I leave my house and personal effects to my wife Joan Njoroge
I leave Sh.9,000 in cash to my son YacoboNjoroge
I leave all my investments to Chuo Kikuu
Any income earned on my investments prior to distribution, I leave to my priest Father Tony Christopher.
I leave the remainder of my estate to Raphael Juma
Additional information:
1. The executor, KamauOtieno, took an inventory of the assets of the testator and determined their fair value at the time of Alex Njoroge’s death to be as follows:
Sh.
Cash 40,000
Household and personal effects 310,000
Investments:
Stocks 21,000
Bonds 44,000
Land (rental property) 65,000
Antiques 19,000
Dividend receivable 1,000
Interest receivable 2,000
Rent receivable 4,000
512,000
======
2. The following Valid claims were made against the estate and paid by the executor:
Sh.
Funeral expenses 17,000
Executor charges 9,000
Medical expenses 11,000
debts 5,000
3. The following cash collections were received by the estate:
Sh.
Dividend 2,000
Interest 3,000
Rent 7,000
Sale of antiques 21,000
4. Prior to 25 June the date the charge and discharge statement was prepared, the executor had made complete distribution to both Joan Njoroge and YacoboNjoroge.
Required:
A charge and discharge statement for the estate of Alex Njoroge. [14 marks]
Question Three
(a) Outline the remedies available to the beneficiary in case of breach of a trust by trustee.
[5 marks]
(b) The parents of Mwangi, Kamau and Ndegwa died in March 2008. Friends and well wishers organized a fund-raising in May 2008 which raised Sh.3,960,000. This money was to cater for the welfare of the three orphans. Mr. Kilimo, who was appointed the trustee, invested this amount as follows:
Sh
9,600 ordinary shares of Sh.10 per value in Fimbo Ltd. 864,000
12,600 ordinary shares of Sh.10 per value in Lima Ltd. 1,512,000
13,200 ordinary shares of Sh.10 per value in Pewa Ltd. 1,584,000
3,960,000
=======
Mr. Kilimo also established an accumulation and maintenance trust to hold these investments on behalf of the children. The trust had a wide investment clause. The accounts were to be made to 30 April each year. When a beneficiary reached the age of 21 years, Mr. Kilimo would transfer the share of the fund due to him/her. Mwangi turned 21 years on 30 April 2012.
The balances on the accumulation fund for Mwangi, Kamau and Ndegwa as at 1 March 2011 were Sh.414,000, Sh.207,900 and Sh.69,300 respectively. To that date, Mr. Kilimo had used accumulated income to purchase 5,775 ordinary shares of Sh.10 per value in Pewa Ltd. in the year to 30 April 2012, Sh.445,500 was received from capital investments and Sh.124,740 from accumulation investments.
Maintenance payments were made as follows:
Mwangi Sh.154,000
Kamau Sh.162,000
Ndegwa Sh.188,000
On 30 April 2012, the market value of the shares in the companies, all listed at Nyumbani Stock Exchange (NSE) were as follows:
Fimbo Sh.120 per share
Lima Sh.160 per share
Pewa Sh.140 per share
Mwangi was to receive 10,000 shares of Sh.10 per value in Lima Ltd and the balance due to him on capital would be made up of the shares in Fimbo Ltd. Out of the accumulation assets, Mwangi was to receive Sh.64,444 in cash and the balance in shares in the Pewa Ltd.
Required:
(a) The beneficiaries and accumulation accounts for the period ended 30 April 2012 [8 marks]
(b) The distribution statements for the capital and accumulation assets as at 30
April 2012. [7 marks]
Question Four
Kariuki died on 31 October 2012 and left his estate as follows:
Sh.
Household furniture 900,000
Cash in house 20,000
Cash at Bank 2,500,000
10,000 ordinary shares of Sh.200 each in HFK Ltd.
Valued at Sh.300 per share 3,000,000
Investment at 5 percent on freehold property securities (interest thereon paid on 30 June 2012)
4,000,000
Share in Business of Kariuki& Co valued at death 12,264,000
Sundry debtors 200,000
Liabilities 50,000
Funeral expenses 100,000
The following additional information is available.
1. A legacy of Sh.200,000 was bequeathed to his executor and was paid on 28 January 2013.
2. The residue of the estate was left in trust for his infant son.
3. The household furniture was sold on 15 December for Sh.960,000.
4. The shares were sold on the same date at Sh.290 ex-div; a dividend being received on
25 January at 10% for the year ending 31 December 2012.
5. Interest on investment in freehold property securities was received on 31 December 2012, on which date the shares in the business of Kariuki was received with interest at 5% per annum.
6. The liabilities and funeral expenses were discharged on20 December 2012 on which date Sh.100,000 of the debts due were received, the balance being unpaid at the date of preparation of the accounts.
Required:
(a) Journal entries to record the above transactions. [5 marks]
(b) The Estate Cash book [4 marks]
(c) The Estate income account [3 marks]
(d) The Estate Capital account [5 marks]
(e) Statement of financial position of Kariuki; deceased as at 31 January 2013. [3 marks]
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