5.1 Solutions.docx
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Practice Exercise 5.1 Ann Litigate had the following trust transactions in the month of June: #
Date 20**
1
June 1
Ann received a cheque (#91) from a new client, Jessica Palmer, as a retainer deposit in an immigration law matter.
$2,500
2
June 1
Ann wrote trust cheque #352 on the trust bank account in payment of invoice #518 previously sent to Karen Charles. Assume that on May 30, Charles had a balance of $4,500.
$4,000
3
June 8
There is an amount of $60 charged to Daniel Pitt for photocopy charges incurred in the preparation of a document brief for use at an upcoming criminal trial. Invoice #519 was sent to Daniel Pitt, and Ann wishes to recover the charges for the disbursement from trust (trust cheque #353). Assume that on May 30, Pitt had a balance of $1,000.
$60
4
June 25
Louise Forte sent cheque #47 written on her personal bank account to the firm in the amount of $3,130. Ann deposited the cheque into the trust bank account and then wrote trust cheque #354 in payment of invoice #520 for $1,130 and held the balance remaining in trust as a retainer.
$3,130
Transaction
Amount
Review the sample worksheet below and then, using the worksheets provided: a. Prepare the appropriate trust bank journal entries to record the transactions shown above. b. Post the entries to the client trust ledgers. c. Post the totals to the appropriate general ledger accounts. d. Complete the client trust listing at the end of the month. Does the listing match the amount in account #215 (Trust Funds Owed)?
Sample worksheets On June 18, Paralegal receives $1,500 as a retainer from a new client, Anthony Johnston. Ann Litigate, Paralegal Trust Bank Journal
Date 20**
June
Received From/ Paid To
18 31
Rec. Anthony Johnston
File No.
Client/Description
01
Johnston, retainer
TJ1
Method of Payment
Trust Bank Account Dr.
Cheque
1,500
Totals
1,500 (115)
Cr.
0 (115)
Sample client ledger after posting Ann Litigate, Paralegal Client Trust Ledgers Account: JOHNSTON, Anthony
File No. 06 Client Trust Ledger
Date 20** June
Received From/Paid To Explanation 18
Disbursements (Dr.)
Receipts (Cr.)
Retainer
Balance in Trust
1,500
1,500
Answer a: Using a single trust bank journal for both receipts and disbursements: Ann Litigate, Paralegal Trust Bank Journal Date 20** June
TJ1
File No.
1
Rec. Jessica Palmer
06
Palmer, retainer re: immigration matter
chq. 91
1
A. Litigate
04
Charles, re: invoice #518
chq. 352
4,000
8
A. Litigate
03
Pitt, re: invoice #519
chq. 353
60
25
Rec. Louise Forte
08
Forte, retainer
chq. 47
25
A. Litigate
08
Forte, re: invoice #520
chq. 354
Client/Description
30
Method of Payment
Trust Bank Account
Received From/ Paid To
Dr.
Cr.
2,500
3,130 1,130
Totals
5,630
5,190
(115/215)
(115/215)
Example using two separate trust journals for receipts and disbursements: Trust Receipts Journal—TRJ1: Because L. Forte provided only one cheque, in part for the payment of an invoice and in part to be used for a retainer in the amount of $2,000 ($3,130 – $1,130), the entire cheque must be deposited into trust and then a disbursement from trust can be made for the portion in satisfaction of the invoice. Trust Receipts Journal Date 20** June
1
Received from Jessica Palmer
PR 06
Description Retainer re: immigration matter
TRJ1 Method of Payment chq. 91
Amount 2,500
25
Louise Forte
08
Retainer
30
chq. 47
3,130
Total
5,630 (115/215)
Trust Disbursements Journal—TDJ1: The date for disbursement will depend on the day Ann Litigate transfers the amount from trust (e.g., by a cheque written from trust and payable to Ann, to be deposited into the general bank account) as payment for an invoice or reimbursement of client disbursement expenses. Trust Disbursements Journal Date 20** June
Paid to
PR
Description
TDJ1 Method of Payment
Amount
1
A. Litigate
04
Paid invoice #518 Karen Charles
chq. 352
4,000
8
A. Litigate
03
Daniel Pitt, re: invoice #519
chq. 353
60
25
A. Litigate
08
Louise Forte, re: invoice #520
chq. 354
1,130
30
Total
5,190 (115/215)
Answer b: Ann Litigate, Paralegal Client Trust Ledgers
Account: PALMER, J. re: Immigration
File No. 06 Client Trust Ledger
Date 20** June
1
Received From/Paid To Explanation
Disbursements (Dr.)
Retainer
Receipts (Cr.) 2,500
Account: CHARLES, K.
Balance in Trust 2,500
File No. 04 Client Trust Ledger
Date 20**
Received From/Paid To Explanation
May
30
Balance held in trust
June
1
Ann Litigate, payment on invoice #518
Disbursements (Dr.)
Receipts (Cr.)
Balance in Trust 4,500
4,000
500
Account: PITT, D.
File No. 03 Client Trust Ledger
Date 20**
Received From/Paid To Explanation
May
30
Balance held in trust
June
8
Invoice #519—photocopy charges
Disbursements (Dr.)
Receipts (Cr.)
Balance in Trust 1,000
60
940
Account: FORTE, L.
File No. 08 Client Trust Ledger
Date 20** June
Received From/Paid To Explanation
25
Retainer
25
Payment on invoice #520
Disbursements (Dr.)
Receipts (Cr.) 3,130
1,130
Balance in Trust 3,130 2,000
Answer c: Ann Litigate, Paralegal General Ledger Accounts
Trust Bank Account Date 20** May June
Account No. 115
Explanation
30 30
PR
Opening balance
3
Totals for June
TJ1
Debit
Credit
Dr. 5,630
5,190
Trust Funds Owed Date 20** May June
PR
Opening balance
30
Dr.
Balance 5,500 5,940
Account No. 215
Explanation
30
Dr./Cr.
Debit
Credit
Dr./Cr.
5,500
Total from client listing
TJ1
Balance
5,630
5,190
Cr.
5,940
Answer d: Ann Litigate, Paralegal List of Balances Owed to Clients June 30, 20** File No.
Account
Balance Owed
06
PALMER, J.
re: Immigration
04
CHARLES, K.
500
03
PITT, D.
940
08
FORTE, L.
2,000
Total Owed to Clients
5,940
Yes, the listing matches the amount in account #215 (Trust Funds Owed).
2,500
Date 20**
1
June 1
Ann received a cheque (#91) from a new client, Jessica Palmer, as a retainer deposit in an immigration law matter.
$2,500
2
June 1
Ann wrote trust cheque #352 on the trust bank account in payment of invoice #518 previously sent to Karen Charles. Assume that on May 30, Charles had a balance of $4,500.
$4,000
3
June 8
There is an amount of $60 charged to Daniel Pitt for photocopy charges incurred in the preparation of a document brief for use at an upcoming criminal trial. Invoice #519 was sent to Daniel Pitt, and Ann wishes to recover the charges for the disbursement from trust (trust cheque #353). Assume that on May 30, Pitt had a balance of $1,000.
$60
4
June 25
Louise Forte sent cheque #47 written on her personal bank account to the firm in the amount of $3,130. Ann deposited the cheque into the trust bank account and then wrote trust cheque #354 in payment of invoice #520 for $1,130 and held the balance remaining in trust as a retainer.
$3,130
Transaction
Amount
Review the sample worksheet below and then, using the worksheets provided: a. Prepare the appropriate trust bank journal entries to record the transactions shown above. b. Post the entries to the client trust ledgers. c. Post the totals to the appropriate general ledger accounts. d. Complete the client trust listing at the end of the month. Does the listing match the amount in account #215 (Trust Funds Owed)?
Sample worksheets On June 18, Paralegal receives $1,500 as a retainer from a new client, Anthony Johnston. Ann Litigate, Paralegal Trust Bank Journal
Date 20**
June
Received From/ Paid To
18 31
Rec. Anthony Johnston
File No.
Client/Description
01
Johnston, retainer
TJ1
Method of Payment
Trust Bank Account Dr.
Cheque
1,500
Totals
1,500 (115)
Cr.
0 (115)
Sample client ledger after posting Ann Litigate, Paralegal Client Trust Ledgers Account: JOHNSTON, Anthony
File No. 06 Client Trust Ledger
Date 20** June
Received From/Paid To Explanation 18
Disbursements (Dr.)
Receipts (Cr.)
Retainer
Balance in Trust
1,500
1,500
Answer a: Using a single trust bank journal for both receipts and disbursements: Ann Litigate, Paralegal Trust Bank Journal Date 20** June
TJ1
File No.
1
Rec. Jessica Palmer
06
Palmer, retainer re: immigration matter
chq. 91
1
A. Litigate
04
Charles, re: invoice #518
chq. 352
4,000
8
A. Litigate
03
Pitt, re: invoice #519
chq. 353
60
25
Rec. Louise Forte
08
Forte, retainer
chq. 47
25
A. Litigate
08
Forte, re: invoice #520
chq. 354
Client/Description
30
Method of Payment
Trust Bank Account
Received From/ Paid To
Dr.
Cr.
2,500
3,130 1,130
Totals
5,630
5,190
(115/215)
(115/215)
Example using two separate trust journals for receipts and disbursements: Trust Receipts Journal—TRJ1: Because L. Forte provided only one cheque, in part for the payment of an invoice and in part to be used for a retainer in the amount of $2,000 ($3,130 – $1,130), the entire cheque must be deposited into trust and then a disbursement from trust can be made for the portion in satisfaction of the invoice. Trust Receipts Journal Date 20** June
1
Received from Jessica Palmer
PR 06
Description Retainer re: immigration matter
TRJ1 Method of Payment chq. 91
Amount 2,500
25
Louise Forte
08
Retainer
30
chq. 47
3,130
Total
5,630 (115/215)
Trust Disbursements Journal—TDJ1: The date for disbursement will depend on the day Ann Litigate transfers the amount from trust (e.g., by a cheque written from trust and payable to Ann, to be deposited into the general bank account) as payment for an invoice or reimbursement of client disbursement expenses. Trust Disbursements Journal Date 20** June
Paid to
PR
Description
TDJ1 Method of Payment
Amount
1
A. Litigate
04
Paid invoice #518 Karen Charles
chq. 352
4,000
8
A. Litigate
03
Daniel Pitt, re: invoice #519
chq. 353
60
25
A. Litigate
08
Louise Forte, re: invoice #520
chq. 354
1,130
30
Total
5,190 (115/215)
Answer b: Ann Litigate, Paralegal Client Trust Ledgers
Account: PALMER, J. re: Immigration
File No. 06 Client Trust Ledger
Date 20** June
1
Received From/Paid To Explanation
Disbursements (Dr.)
Retainer
Receipts (Cr.) 2,500
Account: CHARLES, K.
Balance in Trust 2,500
File No. 04 Client Trust Ledger
Date 20**
Received From/Paid To Explanation
May
30
Balance held in trust
June
1
Ann Litigate, payment on invoice #518
Disbursements (Dr.)
Receipts (Cr.)
Balance in Trust 4,500
4,000
500
Account: PITT, D.
File No. 03 Client Trust Ledger
Date 20**
Received From/Paid To Explanation
May
30
Balance held in trust
June
8
Invoice #519—photocopy charges
Disbursements (Dr.)
Receipts (Cr.)
Balance in Trust 1,000
60
940
Account: FORTE, L.
File No. 08 Client Trust Ledger
Date 20** June
Received From/Paid To Explanation
25
Retainer
25
Payment on invoice #520
Disbursements (Dr.)
Receipts (Cr.) 3,130
1,130
Balance in Trust 3,130 2,000
Answer c: Ann Litigate, Paralegal General Ledger Accounts
Trust Bank Account Date 20** May June
Account No. 115
Explanation
30 30
PR
Opening balance
3
Totals for June
TJ1
Debit
Credit
Dr. 5,630
5,190
Trust Funds Owed Date 20** May June
PR
Opening balance
30
Dr.
Balance 5,500 5,940
Account No. 215
Explanation
30
Dr./Cr.
Debit
Credit
Dr./Cr.
5,500
Total from client listing
TJ1
Balance
5,630
5,190
Cr.
5,940
Answer d: Ann Litigate, Paralegal List of Balances Owed to Clients June 30, 20** File No.
Account
Balance Owed
06
PALMER, J.
re: Immigration
04
CHARLES, K.
500
03
PITT, D.
940
08
FORTE, L.
2,000
Total Owed to Clients
5,940
Yes, the listing matches the amount in account #215 (Trust Funds Owed).
2,500
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