Fiduciary funds are accounted for differently than permanent funds, even though both may account for nonexpendable resources.
Christopher City received a contribution of $520,000 to provide scholarships to the children of deceased city employees. The donor stipulated that all income, including both realized and unrealized investment gains, be used to support the beneficiaries.
1. Record journal entries for the following assuming that the gift is to be accounted for in a private purpose trust (fiduciary) fund.
1. The gift was composed of
o cash of $20,000
o marketable securities with a fair market value of $100,000
o a building with a fair market value of $400,000 and an estimated useful life of 40 years
2. The city leased the building as office space to Brooks Law Firm. It collected $46,000 in rent, and it incurred expenses, other than depreciation, of $15,000. The city records depreciation on the straight-line basis.
3. The city sold $20,000 of the marketable securities for $26,000. At year-end, the remaining securities had a market value of $97,000.
4. It earned and received dividends of $5,000.
2. The city closed the fund's revenue and expense accounts and distributed to beneficiaries the total amount available for distribution. It then closed the distribution account. Prepare the entries to make the distribution and close the accounts.
3. Prepare the fund's year-end statement of fiduciary net assets.
4. How is the fund reported in the city's government-wide statements? Explain.
5. Suppose the trust is established to benefit programs and activities of the city itself. In what type of fund is it accounted for? What are the main differences in accounting principles? How is it reported in the city's government-wide statements?© BrainMass Inc. brainmass.com October 10, 2019, 6:49 am ad1c9bdddf
You will find in attachment an Excel file with two sheets:
Sheet 1: ...
Solution is provided through a dynamic Excel sheet showing journal entries for the private purpose trust (fiduciary) fund, closing entries and financial statements as well as insights on answering development questions. Discussed how fiduciary funds are accounted for differently than permanent funds, even though both may account for nonexpendable resources. Prepared the fund's year-end statement of fiduciary net assets. Discussed how is the fund reported in the city's government-wide statements.