7–C. Part 1. Private Purpose Trust Fund Transactions The City of Monroe Scholars
ID: 2472273 • Letter: 7
Question
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, 2015: Debits Credits Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,500 Accrued Interest Receivable . . . . . . . . . . . . . . . . . . 7,500 Investments in Corporate Bonds . . . . . . . . . . 750,000 Net Assets Held in Trust ……………… . . . . . . . . . $ 807,000 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 807,000 $ 807,000 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, 2015: (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 $206,026, 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 $4,000 and was received in cash. (5) On December 1, RST Corporation stock was sold for $203,500 cash. Those funds were immediately invested in UVW Corporation stock. (6) On December 15, cash scholarships in the amount of $50,000 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).
Explanation / Answer
We Journalise as below
Date
Particulars
Debit
Credit
May 1
Cash
22500
Accrued interest receivable
7500
Interest income
15000
Cash
206026
Contribution from private sources
206026
June 15
Investment in RST Corporation Stock
200000
Cash
200000
November 1
Cash
22500
Interest Income
22500
November 15
Cash
4000
Income from Investment
4000
December 1
Cash
203500
Investment in RST Corporation Stock
200000
Gain on Sale of Investment
3500
December 1
Investment in UVW company stock
203500
Cash
203500
December 15
Scholarships
50000
Cash
50000
December 31
Accrued Interest receivable
7500
Interest Income
7500
December 31
Investment in Corporate bonds
2100
Unrealized Gain on Investments
2100
December 31
Unrealized Loss On Investment
4500
Investment in UVW company stock
4500
Interest on Corporate bond is6 % annualy
i.e 750000 x 6%, =45000 annualy
Semmiannually interest = 45000 / 2, =22500
Also interest accrued at end is fro 2 months . i.e November and december
So it will be 45000 * 2/12, =7500
Gain on investment in RST corporation is calucullated by comparing its purchase price
and last adjusting entries are made to take investments at their realizable value
Date
Particulars
Debit
Credit
May 1
Cash
22500
Accrued interest receivable
7500
Interest income
15000
Cash
206026
Contribution from private sources
206026
June 15
Investment in RST Corporation Stock
200000
Cash
200000
November 1
Cash
22500
Interest Income
22500
November 15
Cash
4000
Income from Investment
4000
December 1
Cash
203500
Investment in RST Corporation Stock
200000
Gain on Sale of Investment
3500
December 1
Investment in UVW company stock
203500
Cash
203500
December 15
Scholarships
50000
Cash
50000
December 31
Accrued Interest receivable
7500
Interest Income
7500
December 31
Investment in Corporate bonds
2100
Unrealized Gain on Investments
2100
December 31
Unrealized Loss On Investment
4500
Investment in UVW company stock
4500
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