(Complete accounting cycle of a Permanent Fund)

In FY 2004, Henry Comstock made a gift to the City of Gold Hill. Under the terms of the gift, the City was to purchase securities and to use the earnings on these securities to purchase books on history for the local library. Only the earnings on the securities can be expended.

During FY 2004, the following transactions occurred:

1. The City received the gift from Mr. Comstock, a check for $\$ 2,500,000$.

2. Shortly after receiving the gift, the City purchased government securities for $\$ 2,500,000$.

3. Investment income of $\$ 100,000$ was received in cash.

4. A transfer of $\$ 85,000$, cash, was made to the Library Fund, a Special Revenue fund.

5. Salaries of $\$ 7,000$ were paid in cash during the year.

6. A payment of $\$ 6,000$ was made to the General Fund to cover the cost of supplies ( $\$ 2,000$ ) and office space ( $\$ 4,000$ ).

7. The fund received a bill for its annual audit, amounting to $\$ 3,000$, from Yerington and Company, CPAs, which it will pay next year.
8. Investment income of $\$ 50,000$ was received in cash.
9. A transfer of $\$ 40,000$ was made to the Library Fund. Of this amount, $\$ 30,000$ was paid in cash. The remainder will be paid to the Library Fund next year.
10. Investment income of $\$ 25,000$ was accrued at the end of FY 2004.
11. By the end of FY 2004, the marketable securities had increased in value by $\$ 40,000$.
Required: 1. Prepare the journal entries necessary to record these transactions on the books of the Permanent Fund.
2. Prepare a balance sheet and a statement of revenues, expenditures, and changes in fund balance for the Permanent Fund.