Reference no: EM132047116

Question - 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, should be used to support the beneficiaries.

1. Record journal entries for the following assuming that the gift is to be accounted for in a fiduciary (i.e., nonexpendable trust) fund.

a. The gift was composed of

• Cash in amount of $20,000
• Marketable securities with a fair value of $100,000
• A building with a fair value of $400,000 and an estimated useful life of forty years

b. The city leased the office as office space to Brooks Law Firm. It collected $46,000 in rent and incurred expenses (other than depreciation) of $15,000. The city records depreciation on the straight-line basis.

c. The city sold $20,000 of the equity securities for $26,000. At year-end the remaining securities had a market value of $97,000.

d. 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 balance sheet.

4. How would the fund be reported in the city's government-wide statements? Explain.

5. Suppose the trust was established to benefit programs and activities of the city itself. In what type of fund would it be accounted for? What would be the main differences in accounting principles? How would it b reported in the city's government-wide statements?

Attachment:- Assignemnt File.rar