Question

On July 1, 2019, the City of Belvedere accepted a gift of cash in the amount of $3,360,000 from a number of individuals and foundations and signed an agreement to establish a private-purpose trust. The $3,360,000 and any additional gifts are to be invested and retained as principal. Income from the trust is to be distributed to community nonprofit groups as directed by a Board consisting of city officials and other community leaders. The agreement provides that any increases in the market value of the principal investments are to be held in trust; if the investments fall below the gift amounts, then earnings are to be withheld until the principal amount is re-established.

The following events and transactions occurred during the fiscal year ended June 30, 2020. Record them in the Belvedere Community Trust Fund:

1. On July 1, the original gift of cash was received.
2. On August 1, $2,212,000 in XYZ Company bonds were purchased at par plus accrued interest ($36,867). The bonds pay an annual rate of 5 percent interest semiannually on April 1 and October 1.
3. On August 2, $904,000 in ABC Company common stock was purchased. ABC normally declares and pays dividends semiannually, on January 31 and July 31.
4. On October 1, the first semiannual interest payment ($55,300) was received from XYZ Company. Note that part of this is for accrued interest due at the time of purchase; the remaining part is an addition that may be used for distribution.
5. On January 31, a cash dividend was received from ABC Company in the amount of $25,000.
6. On March 1, the ABC stock was sold for $921,000. On the same day, DEF Company stock was purchased for $980,000.
7. On April 1, the second semiannual interest payment was received from XYZ Company.
8. During the month of June, distributions were approved by the Board and paid in cash in the amount of $93,000.
9. Administrative expenses were recorded and paid in the amount of $7,000.
10. An accrual for interest on the XYZ bonds was made as of June 30, 2020.
11. As of June 30, 2020, the fair value of the XYZ bonds, exclusive of accrued interest, was determined to be $2,213,000. The fair value of the DEF stock was determined to be $976,000.
12. Closing entries were prepared.

Required:
a. The above events and transactions occurred during the fiscal year ended June 30, 2020. Record them in the Belvedere Community Trust Fund.
b. Prepare (1) a Statement of Changes in Fiduciary Net Position for the Belvedere Community Trust Fund and (2) a Statement of Fiduciary Net Position.

Requirement 1:

On July 1, the original gift of cash was received.

On August 1, $2,212,000 in XYZ Company bonds were purchased at par plus accrued interest ($36,867). The bonds pay an annual rate of 5 percent interest semiannually on April 1 and October 1.

On August 2, $904,000 in ABC Company common stock was purchased. ABC normally declares and pays dividends semiannually, on January 31 and July 31.

On October 1, the first semiannual interest payment ($55,300) was received from XYZ Company. Note that part of this is for accrued interest due at the time of purchase; the remaining part is an addition that may be used for distribution.

On January 31, a cash dividend was received from ABC Company in the amount of $25,000.

On March 1, the ABC stock was sold for $921,000.

Record the entry for the purchase of DEF Company stock on March 1 for $980,000.

On April 1, the second semiannual interest payment was received from XYZ Company.

During the month of June, distributions were approved by the Board and paid in cash in the amount of $93,000.

Administrative expenses were recorded and paid in the amount of $7,000.

An accrual for interest on the XYZ bonds was made as of June 30, 2020.

As of June 30, 2020, the fair value of the XYZ bonds, exclusive of accrued interest, was determined to be $2,213,000. The fair value of the DEF stock was determined to be $976,000.

Record the closing entries.

Requirement 2:

Prepare a Statement of Changes in Fiduciary Net Position for the Belvedere Community Trust Fund.

	CITY OF BELVEDERE Statement of Changes in Fiduciary Net Position Community Trust Fund For the Year Ended June 30, 2020 Additions: Investment Income: Total Additions Deductions: Total Deductions

Requirement 3:

Prepare a Statement of Fiduciary Net Position.

	CITY OF BELVEDERE Statement of Fiduciary Net Position Community Trust Fund As of June 30, 2020 Assets Total Assets Liabilities and Fund Equity Liabilities Total Liabilities Fiduciary Net Position Restricted for Private Purpose Total Net Position

Answer 1

Journal Entries
In the Books of Belvedere Community Trust Fund
Date	Particulats	Debit	Credit
2019
Jul-01	Cash	$ 33,60,000.00
	To	Contributions		$ 33,60,000.00
	original gift of cash was received
August
1	Investment in Bonds	$ 22,12,000.00
	Accrued Interest	$       36,867.00
	To	Cash		$ 22,48,867.00
	XYZ Company bonds were purchased at par plus accrued interest
2	Investment in common stock	$    9,04,000.00
	To	Cash		$    9,04,000.00
	ABC Company common stock was purchased.
Oct-01	Cash/Bank	$       55,300.00
	To	Accrued Interest (for the initial period)		$       36,867.00
	To	Interest income(current period)		$       18,433.00
	[the first semiannual interest payment received from XYZ Company including accrued interest]
Jan-31	Cash	$       25,000.00
	To Dividend Received		$       25,000.00
	[Receipt of Cash Dividend, dividend is recorded on the basis of declaration or receipt , it is assumed that declaration and receipt were on the same day so, no accrual entry eas passed,receipt entry was passed]
Mar-01	Cash/Bank	$    9,21,000.00
	To	Investment in common stock		$    9,04,000.00
	To	Gain on sale of stock		$       17,000.00
	[sale of ABC stock and recogonised the income thereon]
	Investment in common stock	$    9,80,000.00
	To	Cash/Bank		$    9,80,000.00
	[DEF Company stock was purchased for $980,000]
Apr-01	Accured interest	$       55,300.00
	To	Interest income		$       55,300.00
	[Interest accured semiannually on bonds]
	Cash/Bank	$       55,300.00
	To	Interest income		$       55,300.00
	[Assumed that the full amount accrued was received]
June	Distribution to non profit organisation		$       93,000.00
	To	cash		$       93,000.00
	[distributions were approved by the Board and paid in cash]
	Administrative Expenses	$          7,000.00
	To	cash		$          7,000.00
	Accured interest	$       27,650.00
	To	Interest income		$       27,650.00
	[$ 2212000 x 5% x 3/12 months]
	[Interest accrued for 3 months]
	Investment in Bonds	$          1,000.00
	Loss in market value	$          3,000.00
	To	Investment in common stock		$          4,000.00
	[Recogonising the market value fluctuations]
Closing Entries
	Interest income	$    1,01,383.00
	Dividend Received	$       25,000.00
	Gain on sale of stock	$       17,000.00
	To	Administrative Expenses		$          7,000.00
	To	Loss in market value		$          3,000.00
	To	Income summary account		$    1,33,383.00
	[ Nominal accounts are closed]

	Statement of Changes in Fiduciary Net Position
	Fiduciary Funds
Particulars	Private Purpose Trusts
	Additions
a	Contributions		$   33,60,000.00
b	gain on sale of stock and market vakue changes	$         14,000.00	[17000-3000],gain on sale of stock + market vakue changes
c	Interest			$     1,01,383.00
d	Dividend		$         25,000.00
e	Total Investment Earnings	$     1,40,383.00	b+c+d
f	Total Additions		$   35,00,383.00	a+e
	Deductions
g	Distribution to non profit organisation	$         93,000.00
h	Administrative Expenses	$           7,000.00
i	Total Deductions		$     1,00,000.00	g+h
j	Net Position		$   34,00,383.00	f-i

The statement of fidiuciary net position can be prepared with the figures available in the above working.