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Establish investment trust fund for bay town and valley city

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Question: (Journal entries and financial statements for an Investment Trust Fund) The City of Titanville established an Investment Trust Fund for Bay Town and Valley City. The cities contributed $200,000 and $100,000, respectively, to the fund. During 2012 the following transactions took place. Prepare journal entries to record the transactions in the Investment Trust Fund.

1. Bay Town contributed CDs valued at $200,000, and Valley City contributed $100,000 to the fund.

2. The cash contributed by Valley City was invested in U.S. government securities.

3. The CDs matured. The principal was $70,000, interest on the CDs was $3,000.

4. The principal amount received in the previous transaction was reinvested in municipal bonds.

5. The fund incurred internal administrative expenses totaling $700, of which $500 was paid in cash.

6. The General Fund charged the Investment Trust Fund $500 for managing the investments. This amount was paid in cash.

7. The trust fund income of $1,800 ($3,000 - $700 - $500) was distributed as provided in the trust agreement: two-thirds to Bay Town and one-third to Valley City.

Reference no: EM131703492

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