Homework SourseThe City of Monroe Scholarship Foundation privatepurpose tru
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.
| 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 |
Solution
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
