Question

The City of Monroe Scholarship Foundation private-purpose trust fund had the following account balances on January 1, 2017:

	Debits	Credits
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 50,500
Accrued Interest Receivable . . . . . . . . . . . . . . . . . .	7,500
Investments in Corporate Bonds . . . . . . . . . .	750,000
Net position Held in Trust ……………… . . . . . . . . .		$ 808,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 808,000	$ 808,000

Required:

a. Open a general journal for the City of Monroe Community Foundation Trust Fund and record the following transactions for the year ending December 31, 2017:

(1) On May 1, the first semiannual interest payment was received on the corporate bonds. The bonds pay 6 percent annual interest, semiannually on May 1 and November 1.

(2) During the first half of the year, additional contributions from individuals and foundations amounted to $205,500, in cash. From these funds, $ 200,000 were invested in RST Corporation stock on June 15.

(3) On November 1, the second semiannual interest payment was received from the investment in bonds.

(4) On November 15, a dividend was declared by RST Corporation in the amount of $2,000 and was received in cash.

(5) On December 1, RST Corporation stock was sold for $204,000 cash. Those funds were immediately invested in UVW Corporation stock.

(6) On December 15, cash scholarships in the amount of $48,000 were made to various college students.

(7) On December 31, an accrual was made for year-end interest on the corporate bonds.

(8) Also, on December 31, it was determined that the market value of the corporate bonds, exclusive of accrued interest, was $ 752,100 and that the market value of UVW Company stock was $ 199,000.

b. Post the entries to the Community Foundation Trust ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Net position.  

Answer 1

Journal Entries
Date	Particulars	Debit	Credit	Comments
1st May	Cash	22,500.00		6% on Invsmt amounting 7,50,000 paid semi anually. So Interest received will be 7,50,000*6%*6/12. Since Accrued Interest receivable was already created, it was reversed
	Interest income		15,000.00
	Accrued Interest Receivable		7,500.00
1st Half	Cash	2,05,000.00		Being cash received as contributions. So cash debited and contributions credited since it a liability
	Contributions		2,05,000.00
15th June	RST Corporation Stock	2,00,000.00		Being cash outflow made due to investment made in RST. So Investment debited and cash credited
	Cash		2,00,000.00
1st Nov	Cash	22,500.00		6% on Invsmt amounting 7,50,000 paid semi anually. So Interest received will be 7,50,000*6%*6/12. So credited to income and debited cash
	Interest Income		22,500.00
15th Nov	Cash	2,000.00		Being cash received as dividend. So income recognised
	Dividend		2,000.00
1st Dec	Cash	2,04,000.00		Being Profit booked on sale of investment. Cash received and investment sold.
	RST Corporation Stock		2,00,000.00
	Profit on sale of Investment		4,000.00
1st Dec	Investment UVW Corporation stock	2,04,000.00		Being cash invested in UVW Stock. Cash outflow happened so credited and investment debited
	Cash		2,04,000.00
15th Dec	Scholarships	48,000.00		Being cash paid for scholarships. So credited cash
	Cash		48,000.00
31st Dec	Accrued Interest receivable	7,500.00		Since till 1st Nov interest booked, Only balance for 2 months need to be accrued for the year. So the calculation will be 750000*6%*2/12.
	Interest income		7,500.00
31st Dec	Investment in Corporate Bonds	2,100.00		Invsmt amounting 750000 valued at 752100. So difference 752100-750000. booked as income
	Fair Value changes in Investment		2,100.00
31st Dec	Fair Value changes in Investment	5,000.00		Invsmt amounting 204000 valued at 199000. So difference 199000-204000. booked as Loss
	Investment UVW Corporation stock		5,000.00

Ledger Accounts
Cash
Date	Particulars	Amt	Date	Particulars	Amt
	Opening balance	50,500.00	15th June	RST Corporation Stock	2,00,000.00
1st May	Interest income	15,000.00	1st Dec	Investment UVW Corporation stock	2,04,000.00
1st May	Accrued Interest Receivable	7,500.00	15th Dec	Scholarships	48,000.00
1st Half	Contributions	2,05,000.00
1st Nov	Interest Income	22,500.00	31st Dec	By balance c/d ( Bal.Fig)	54,500.00
15th Nov	Dividend	2,000.00
1st Dec	RST Corporation Stock	2,00,000.00
1st Dec	Profit on sale of Investment	4,000.00
	Total	5,06,500.00		Total	5,06,500.00
	To Balance b/d	54,500.00
Interest income
Date	Particulars	Amt	Date	Particulars	Amt
			1st May	Cash	15,000.00
			1st Nov	Cash	22,500.00
31st Dec	To Net Position	45,000.00	31st Dec	Accrued Interest receivable	7,500.00
	Total	45,000.00		Total	45,000.00
Accrued Interest Receivable
Date	Particulars	Amt	Date	Particulars	Amt
	Opening Balance	7,500.00	1st May	Cash	7,500.00
31st Dec	Interest income	7,500.00
				By Balance c/d	7,500.00
	Total	15,000.00		Total	15,000.00
	To Balance b/d	7,500.00
Contributions
Date	Particulars	Amt	Date	Particulars	Amt
	To Balance c/d	2,05,000.00	1st Half	Cash	2,05,000.00
	Total	2,05,000.00		Total	2,05,000.00
				By balance b/d	2,05,000.00
RST Corporation Stock
Date	Particulars	Amt	Date	Particulars	Amt
15th June	Cash	2,00,000.00	1st Dec	Cash	2,00,000.00
	Total	2,00,000.00		Total	2,00,000.00
Dividend
Date	Particulars	Amt	Date	Particulars	Amt
31st Dec	To Net Position	2,000.00	15th Nov	Cash	2,000.00
	Total	2,000.00		Total	2,000.00
Profit on sale of Investment
Date	Particulars	Amt	Date	Particulars	Amt
31st Dec	To Net Position	4,000.00	1st Dec	Cash	4,000.00
	Total	4,000.00		Total	4,000.00
Investment UVW Corporation stock
Date	Particulars	Amt	Date	Particulars	Amt
1st Dec	Cash	2,04,000.00	31st Dec	Fair Value changes in Investment	5,000.00
				By Balance c/d	1,99,000.00
	Total	2,04,000.00		Total	2,04,000.00
	To Balance b/d	1,99,000.00
Scholarships
Date	Particulars	Amt	Date	Particulars	Amt
15th Dec	Cash	48,000.00		By Net Poaition	48,000.00
	Total	48,000.00		Total	48,000.00
Investment in Corporate Bonds
Date	Particulars	Amt	Date	Particulars	Amt
	Opening Balance	7,50,000.00		By Balance c/d	7,52,100.00
31st Dec	Fair Value changes in Investment	2,100.00
	Total	7,52,100.00		Total	7,52,100.00
	To Balance b/d	7,52,100.00
Fair Value changes in Investment
Date	Particulars	Amt	Date	Particulars	Amt
31st Dec	Investment UVW Corporation stock	5,000.00	31st Dec	Fair Value changes in Investment	2,100.00
				By Net Position	2,900.00
	Total	5,000.00		Total	5,000.00
Net Position
Date	Particulars	Amt	Date	Particulars	Amt
	Scholarships	48,000.00		Opening Balance	8,08,000.00
	Fair Value changes in Investment	2,900.00		Interest income	45000
				Profit on sale of Investment	4000
	To Balance c/d	8,08,100.00		Dividend	2000
	Total	8,59,000.00		Total	8,59,000.00
				By Balance b/d	8,08,100.00

Journal Entries for closing all nominal accounts to Net Position
Date	Particulars	Debit	Credit	Comments
31st Dec	Interest income	45,000.00		Being all nominal accounts balances were transferred to Net Position account
	Profit on sale of Investment	4,000.00
	Dividend	2,000.00
	Net Position ( Bal. fig)		100.00
	Scholarships		48,000.00
	Fair Value changes in Investment		2,900.00