The Doyle Trust Reports Distributable Net Income for the Year

question 53

Multiple Choice

The Doyle Trust reports distributable net income for the year of $100,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $20,000 to Roger and $20,000 to Sally. After paying these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $25,000 to Roger and $50,000 to Sally. How much gross income from the trust must Sally recognize?

• A) $70,000
• B) $60,000
• C) $40,000
• D) $20,000

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Definitions:

Indirect Method

A way of calculating cash flows from operating activities by starting with net income and adjusting it for changes in non-cash accounts.

Patent Amortization

The process of expensing the cost of a patent over its useful life, reflecting the consumption of the patent's value over time.

Depreciable Asset

A tangible asset that is subject to depreciation, reflecting its loss in value over time due to wear and tear, or obsolescence.

Indirect Method

A way of preparing a cash flow statement where net income is adjusted for non-cash transactions, deferrals, and accruals to calculate cash from operating activities.