A successful businessman in the community has contacted the Moose County Board of Commissioners about donating income producing securities to the County to support a particular activity. Under the agreement, the County would be required to maintain the principal amount of the gift but could use the resulting earnings. The following events occurred in 2012:
1. Securities, which had an original cost of $4,250,000 were donated to the County on January 1. The fair value of the securities at that date was $5,790,000, including:
• Corporate equities of $2,700,000.
• Corporate bonds of $3,000,000.
• Accrued interest receivable on the bonds of $90,000.
2. During the year the fund received $240,000 in interest payments on the bonds. At the end of the year, accrued interest on the bonds totaled $85,000.
3. During the year the fund received dividends on the corporate equities of $108,000.
4. During the year the fund paid $297,000 supporting activities identified in the trust agreement and had outstanding bills to be paid of $2,500.
5. The fair value of the securities at December 31 was:
• Corporate equities of $2,550,000.
• Corporate bonds of $3,190,000.
Required:
You are to prepare financial statements for the fund. In Part 1 the activities supported by the fund benefit the citizenry in general. In Part 2, the activities benefit only selected individuals.
Part 1 Assume it is appropriate to report the gift and related transactions in a Permanent Fund following modified accrual basis statements. Using the Excel template provided:
a. Prepare journal entries recording the events above.
c. Prepare closing entries.
d. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance and a Balance Sheet (assume spendable net resources are to be classified as restricted for other purposes) .
Part 2 Assume it is appropriate to report the gift and related transactions in a Private Purpose Trust Fund following the accrual basis. Using the Excel template provided:
a. Prepare journal entries recording the events above.
c. Prepare closing entries.
d. Prepare a Statement of Changes in Fiduciary Net Assets and a Statement of Fiduciary Net Assets.
The Excel template contains separate tabs for
(1) Permanent fund journal entries and T-accounts,
(2) Private-purpose trust fund journal entries and T-accounts,
(3) Closing entries,
(4) Permanent fund financial statements, and
(5) Private-purpose trust fund financial statements. Both the T-accounts and financial statements may contain accounts you will not need.