Question

Chapter 7 – Fiduciary Funds

7–C. Part 1. Private Purpose Trust Fund Transactions

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.

7–C. Part 2. Pension Trust Fund Transactions

The City of Monroe Police Department pension plan, a single-employer, defined-benefit plan, reported the following account balances as of January 1, 2017:

	Debits	Credits
Cash	$137,000
Accrued Interest Receivable	75,000
Investments: Bonds	5,300,000
Investments: Common Stock	2,790,000
Accounts Payable		$27,000
Net position Held in Trust for Employee Benefits		8,275,000
Totals	$ 8,302,000	$8,302,000

Required:

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

(1) Member contributions were received in the amount of $400,000. The City General Fund contributed the same amount.

(2) Interest was received in the amount of $212,000, including the accrued interest receivable at the beginning of the year. The interest accrual at year end amounted to $86,000.

(3) During the year, common stock dividends amounted to $125,000.

(4) Investments were made during the year in common stock in the amount of $650,000.

(5) Annuity benefits in the amount of $325,400, disability benefits of $ 82,020 and refunds to nonvested terminated employees of $39,800 were recorded as liabilities.

(6) Accounts payable, in the amount of $460,700, were paid in cash.

(7) During the year, common stock valued at $505,000 was sold for $506,800. A portion of these funds, $500,000 were invested in common stock of a different company.

(8) At year-end, the market value of investments in bonds increased by $7,750; the market value of investments in stocks decreased by $3,250.

b. Post the entries to the Police Department Pension Trust ledger (t-accounts).

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

Answer 1