Trust And Executorship Question Paper

Trust And Executorship

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR
COMMERCE

BAC 411: TRUST AND EXECUTORSHIP

DATE: Friday 28th August, 2009
TIME: 2.00 p.m. – 4.00 p.m.

INSTRUCTIONS
1. The examination has FOUR questions.
2. Answer ALL the questions.
3. SHOW YOUR WORKINGS

Q1. (a) Explain
FOUR reasons why a legacy may fail.

[8 marks]

(b)
Kombo died on 31st October, 2007 and left his estate as follows:

Sh
Household
furniture

90,000
Cash-In-Hand

2,000
Cash
at
Bank
250,000

10,000 ordinary shares of sh 20 in K.F.C Ltd

Valued at sh 30 per share

300,000

Investment at 5% on freehold securities
(Interest
paid
to
30th June 2007)

400,000

Share in Business of Kombo & Co. valued

at death

1,226,000
Sundry
debtors

20,000

His liability amounted to:

5,000
Funeral
expenses

10,000

Page 1 of 5

The following additional information is available:

1.
A legacy of sh 20,000 was bequeathed to his executor and was paid on
28 January 2008.

2.
The residue of the estate was left in trust for his infant son.

3.
The household furniture was sold on 15 December 2007 for sh 96,000.

4.
The shares were sold on the same date at sh 29 ex div: A dividend being
Received on 25th January 2008 at 10% for the year ended 31 December
2007.
5.
Interest on Investment in Freehold property securities was received on 31
December 2007, on which date the shares in the Business of Kombo and
Co. was received with interest at 5% per annum.
6.
The liabilities and funeral expenses were discharged on 30th December,
2000 on which date sh 10,000 of the debts due were received. The
balance being unpaid at the date of preparation of the account.
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]

[Total 25 marks]
Q2.
Mr. John-John died on 1st February 2008 leaving the following estate:

Sh
Building
Society
deposit
50,420

Interest accrued to date

390
Balance
at
Bank
49,650
Personal
Chattels
36,000

Freehold house

240,000

Sh 60,000 10% Government Stock

420,000

7,000 Ordinary Shares of sh 10 each in KBL
100,000

3,000 Ordinary Shares of sh 10 each in BAT (K)

30,000

926,460

Debts and Funeral expenses

(10,460)

916,000
Page 2 of 5

His will included the following legacies
i)
To his wife Jane freehold house, personal chattels, the ordinary shares in
both Breweries and B.A.T. and a sum of 150,000.
ii)
To his daughter Susan his land in Ngong and the sum of sh 216,000.
iii)
To his sons George, Herald and Fredrick the sum of 120,000 each.
iv)
To his sister Caroline the sum of sh 100,000
v)
To his Friend Charles the sum of sh 24,000
vi)
To his brother Victor his holding of sh 50,000 holding Bond.
Additional Information
(1)
His will directed that the residue and any income arising during the
administration of the estate should go to his wife.
(2)
The land in Ngong was sold for sh 150,000 in 2006 and the savings bond
encashed in 2007.
(3)
His sister Caroline died in 2005 and his Son Harold died in 2004, leaving
the sons John and Philip. All beneficiaries are of full age.
(4)
Received dividends of sh 10 per shares for the year ended 31 December
2007 on Breweries Ltd shares.
Required
(i)
Show the Distribution of the Estate.

[12 marks]
(ii)
Prepare
Estate
cash
Account
[8
marks]

[Total 20 marks]

Q3.
Jomvu Kuu died in 2002 and left by his will the residue of his estate to his
children, Reuben and Levi in equal shares. The will directed that a child’s share
of the estate should be ascertained and discharged on reaching 21 years of age.
The trustees were empowered to maintain the children out of the Income and to
use their unfaltered discretion in the choice of investment.

The trial balance extracts from the books of the trust as at 31 July 2008 was as
follows:

Page 3 of 5

Sh
“000”
Sh
“000”

Investment on estate capital A/c:

20,000 shares of sh 100 in ABC Ltd
2,200

30,000 shares of sh 100 in Mapingo Ltd
2,800

Investment on Accumulation Accounts:

1,000 shares of sh 100 each ABC Ltd
110

1,000 shares of sh 100 each Mapingo Ltd
90

Balances:

On Estate Capital Account

200

On Accumulation Account

50
Estate
Capital
Account 5,200
Accumulation
Account:
Reuben

150

Levi

100
5,450
5,450

Reuben attained the age of 21 years on 31 October, 2003, on which date the
market prices of the Investment were:
ABC
Ltd
shares sh
125
Mapingo
Ltd
shares
sh
100

Transaction in the three months to 31 October 2003 comprised

1 August 2008:
Receipt of dividend of sh 5 each on ABC Ltd shares

31 August 2008:
Maintenance payment of sh 30,000 and sh 20,000 for
Reuben and Levi

31 October 2008:
The trustees revalued all of the Investments and discharged
their liability to Reuben by transfer to him of:
• One half of each of the Investments held on Capital
Accounts.
• ? of each of the Investments held on accumulation
Account.

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