A Trust Has Net Accounting Income of $30,000, but Distributable

question 30

Multiple Choice

A trust has net accounting income of $30,000, but distributable net income (DNI) of only $25,000 because certain expenses are charged to principal. The trust is required to distribute $10,000 to Alice and it makes a discretionary distribution of $20,000 to Ben. The trust has no tax-exempt income. The amount that Ben reports as gross income is

• A)$20,000.
• B)$16,667.
• C)$15,000.
• D)none of the above

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Definitions:

Conversion Costs

Conversion costs are the combined costs of labor and overhead expenses required to convert raw materials into finished products.

Equivalent Units

Measures used in manufacturing to express the amount of work completed in terms of fully finished units during a given period.

First-in

This typically refers to the inventory valuation method "First-In, First-Out" (FIFO), which assumes the first items produced or purchased are the first ones sold.

Conversion Costs

Costs incurred during the transformation of raw materials into finished goods, typically including labor and overhead.