Question

The City of Warwick received $4,000,000 from one of its most prominent citizens during the year...

The City of Warwick received $4,000,000 from one of its most prominent citizens during the year ended June 30, 20X9. The donor stipulated that the $4,000,000 be invested permanently, and that interest and dividends earned on the investments be used to support the homeless people of Warwick. During the year ended June 30, 20X9, dividends received from stock investments amounted to $20,000, while interest received from bond investments amounted to $40,000. At June 30, 20X9, $10,000 of interest was earned, but it will not be received until July of 20X9. The fair value of the securities in which the $4,000,000 was invested had increased $8,000 by June 30, 20X9.

50) Refer to the above information. On the statement of fiduciary net assets at June 30, 20X9, the nonexpendable trust fund should report investments and interest receivable of:

Investments

Interest

Receivable

A)

$

4,000,000

$

10,000

B)

$

4,008,000

$

10,000

C)

$

4,008,000

$

0

D)

$

4,000,000

$

0

A) Option A

B) Option B please explain this answer

C) Option C

D) Option D

Answer: B

Business   Accounting   
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Answer #1

It should be noted that On the statement of Fiduciary net assets, Investment will be quoted at the current market value. As per the question, the value of investment of $4,000,000 has risen by $8,000 which will bring the investment value to $4,008,000.

Also, the Interest receivable of $10,000 is to be booked as earning whether the realization is done in cash or not since the interest belongs to the period ended June20, 20X9. Since Interest is not yet realized in cash as on June 30, it will be appearing as Interest receivable under current assets.

Both $4,008,000 of investment and Interest receivable of $10,000 will be reported on the statement of Fiduciary as non-expandable trust fund.

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