Question

Assignment 2 A successful businessman in the community has contacted the Badr 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 ot the gift but could use the resulting earnings. The following events occurred in 2017 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 $5,832,000, including: Corporate equities of $2,820,000. Corporate bonds of $3,000,000. Accrued interest receivable on the bonds of $12,000. 2. During the year, the fund received dividends on the corporate equities of $98,000. 3. During the year, the fund received $180,000 in interest payments on the bonds. At the end of the year, accrued interest on the bonds totaled $15,000. 4. During the year, the fund paid $230,000 supporting activities identified in the trust agreement and had outstanding bills to be paid of $6,000. 5. The fair value of the securities at December 31 was: Corporate equities of $2,785,000. . Corporate bonds of $3,060,000. Required: You are to prepare financial statements for the fund. Assume it is appropriate to report the gift and related transactions in a Private-Purpose Trust Fund following the accrual basis. Prepare journal entries recording the events above. Prepare a Statement of Changes in Fiduciary Net Assets Prepare a Statement of Fiduciary Net Assets. a. b. c. CY 2 820)0oo

Answer 1

A private purpose trust fund is built for private purposes in which the gift received (Donation), called principal and interest amount can be spent on specific activities as directed. This is the slight difference between Private purpose trust fund and public purpose trust fund. In public purpose trust fund there is restriction on principal amount spending.

If the primary beneficiaries in a fund is government and citizens, then it will be a public purpose trust fund.

The accounting of this fund is quite similar to investment fund.

There is Additions and Deductions in the statement of Changes in Net Asset and at last we find Net Asset position.

A)

Journal Entries for Transaction.:

Particulars Amount Dr. Amount C Date Jan-01 Investment In Corporate Equity A/c Dr. 2820000 Dr. 3000000 Cr Investment In Corporate Bonds A/c Net Position- Restriction for Particular Activity A/c (Being Gift received) 5820000 Jan-01 Accrued Interest Receivable on Bonds A/c 12000 Net Position- Unrestricted A/c (Being Interest receivable recorded) Cr 12000 XXXXX Cash A/c 98000 Dividend Received (Being Dividend Received) Cr 98000 177000 XXXXX Cash A/c Dr Accrued Interest Receivable on Bonds A/c Interest Received A/c (Being Interest Received) 180000 Expenses for Supporting Activities A/c Cash A/c Outstanding Bills A/c (Being Expenses paid) Dr. Cr Cr 236000 XXXXX 230000 Dec-31 Corporate Bonds A/c Dr Corporate Equity A/c Increase in Fair Value of Investment A/c (Being Securities reinstated at fair value.) 35000 25000 Cr Debit Trial Balance December 31, 2017 Outstanding Bills Accrued Interest Receivable Expenses for Supporting Activities Cash Increase in Fair Value of Investments Interest Income Dividend Investment in Corporate Bonds Investment in Corporate Equity Net Position- Restriction for Particular Activity Net Position- Unrestricted Total Credit 6000 15000 236000 45000 25000 180000 98000 2785000 3060000 5820000 12000 61410006141000

B)

Statement of Changes in Fiduciary Net Asset.:

Badr County Boards of Commissioners Statement of Changes in Fiducuiary Net Assets/Position Private Trust Fund he year Ended December 31st, 2017 Additions Investment Earnings. Dividend Income Interest Income Net Increase in Fair Value of Investments Corporate Equities Corporate Bonds 98000 180000 25000 35000 60000 Total Additions 303000 Deductions: Expenses for Supporting Activities 236000 Total Deductions 236000 67000 5832000 5899000 Change in Fiduciary Net Position Fiduciary Net Position-Beginning Fiduciary Net Position-Ending

Note for Interest Income Opening Interest Receivable Interest of The Year Closing Interest Receivable Net Interest Received in cash 12000 180000 15000 177000

C) Statement of Fiduciary Net Assets

Badr County Boards of Commissioners Statement of Net Assets/Position Private Trust Fund As at December 31st, 2017 Assets Cash and Investments: Cash Investment in Corporate Bonds Investment in Corporate Equity 5890000 45000 2785000 3060000 Accounts Receivable: 15000 Accrued Interest Receivable 15000 Total Assets 5905000 Liabilities nts payable and Accrued Liabilities 6000 Outstanding Bills 6000 Net Position Net Position- Restriction for Particular Activity Opening position +)Increase in Fair Value of Investments 5899000 5845000 5820000 25000 Net Position- Unrestricted Opening position (+)Interest Income (+ )Dividend Income (- )Supporting Activity paid 54000 12000 180000 98000 236000 Total Liabilities 5905000