Question

(Complete cycle—Permanent Fund)

Dr. Theodore Dough made a $500,000 gift to the Village of Radnor. Dr. Dough stipulated that the corpus of the gift (together with all investment gains and losses) was to remain intact in perpetuity and that all earnings on the investments (after paying expenses for administering the gift) were to be used solely for the purchase of books by the Teddy Library Special Revenue Fund. Record the following transactions in the Dough Permanent Fund, and prepare the required fund financial statements for the year ended December 31, 2019.

1. Dough donated $500,000 to the Village of Radnor.

2. The entire gift was immediately invested in various securities.

3. The investments earned $30,000 in dividends and interest during the year.

4. The Permanent Fund paid the village $2,000 for administrative expenses.

5. In accordance with the terms of the gift, $25,000 was sent to the Teddy Library Special Revenue Fund.

6. At year-end, the investments held by the Permanent Fund had a fair market value of $508,000.

Answer 1

	Donation to a village of Radnor :
	Particulars			Debit (in $)	Credit (in $)
1.	The gift to Radnor A/c                                                                                      Dr			5,00,000
	To Permanent Fund A/c				5,00,000
	(Being Gift made to Village of Radnor and the corpus has been remained intact in perpetuity)
2.	Investment A/c                                                                                             Dr			5,00,000
	To Bank A/c				5,00,000
	Being investment made for the amount equal to the Gift made.
3.	Investments A/c                                                                                          Dr			30,000
	To Interest on investments A/c				30,000
	Being interest earned on investments
4.	Interest on investments A/c                                                                       Dr			30,000
	To Income & Expenditure A/c				30,000
	(Being interest on investment amount has been added to the investments balance)
5.	Admin charges A/c                                                                                      Dr			2,000
	To Bank A/c				2,000
6.	Income & Expenditure A/c                                                                        Dr			2,000
	To Admin charges A/c				2,000
	(Being admin charges paid to Village of Radnor )
	Fund financial statements for the year ended December 31, 2019 :
	Fund Balance sheet
	Particulars			Amount (in $)
	Assets :
	Investments			5,30,000
	Bank A/c			-5,02,000
	Total assets			28,000
	Liabilities :
	Permanent fund A/c			5,00,000
	Excess of expenditure over income			-4,72,000
	Total Liabilities			28,000
	Statement of Revenue, Expenditures, and changes in balances of funds :
	Particulars			Amount in $
	Revenues :
	Interest on investments			30,000
	Expenses :
	The gift to Village of Radnor			-5,00,000
	Administrative expenses			-2,000
	Net movement			-4,72,000