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AQUA CITY INVESTMENT TRUST FUND INITIAL INVESTMENTS BY PARTICIPANTS AT CREATION OF INVESTMENT TRUST FUND Investments Prior Fair Value Current Fair Value Aqua City General Fund $ 750,000 $ 780,000 Aqua School District 1,250,000 1,270,000 Aqua Township 1,500,000 1,500,000 Water City 1,000,000 1,050,000 Totals 4,500,000 $ 4,600,000 AQUA CITY INVESTMENT TRUST FUND TRANSACTIONS FOR CURRENT FISCAL YEAR Set up the investment trust fund by recording the appropriate amounts of securities that are being given to the investment trust fund by the participants. Assume that of the amounts shown, the General Fund's and Water City's investments were all in certificates of deposit (CDs), half of the School District's and Township's investments were in CDs, and the remaining amounts for the School District and Township were in U.S. Treasury notes. CDs that had been recorded in the amount of $1,250,000 matured and the pool received $1,325,000 in cash at maturity. $750,000 of this amount was reinvested in CDs. The School District withdrew $300,000 in funds needed for operations. The Township withdrew $250,000 in funds at the same time. Participant interest percentages need to be recalculated at this time. (d) Interest on Treasury notes in the amount of $40,000 was collected. The Township invested an additional $150,000 in the investment trust fund. Participant interest percentages need to be recalculated at this time. (f) Interest accrued on CDs at year end amounted to $42,500. The Treasury notes increased in value by $15,000 as of the end of the fiscal year. (h) At the end of the year, it was decided to compute and record the pool's liability or net assets held for each of the four participants for its appropriate proportionate share of earnings on the pooled investments. Be sure to take into account the interest percentages that are in effect at the time the earnings are received or recorded. Problem 1 (25 points). The city council of Aqua City decided to pool the investments of its General Fund with those of Aqua School District, Aqua Township, and Water City. Each of these entities carried its investments at fair value as of the prior balance sheet date. All investments will be revalued to current fair value at the date of the creation of the pool. At that date, the prior and current fair values of the investments for each of the participants were as indicated on the attached schedule. The transactions relating to the investment trust fund for the current fiscal year are attached. It has been agreed that the allocation of earnings will be based on the participants' share of the investment trust fund at the time the earnings are received by the fund but before they are distributed to the participants. REQUIRED: (1) Prepare general journal entries, in proper form, to record the above transactions for the Aqua City Investment Trust Fund. Use the letter of the transaction for the date. Omit explanations. Round all percentages for the participants shares to two decimal places (four decimal places in all) and all dollar amounts to the nearest whole dollar. Prepare general journal entries, in proper form, to record those transactions that should be made by Aqua Township in its General Fund that relate to this investment trust fund. (2) AQUA CITY INVESTMENT TRUST FUND INITIAL INVESTMENTS BY PARTICIPANTS AT CREATION OF INVESTMENT TRUST FUND Investments Prior Fair Value Current Fair Value Aqua City General Fund $ 750,000 $ 780,000 Aqua School District 1,250,000 1,270,000 Aqua Township 1,500,000 1,500,000 Water City 1,000,000 1,050,000 Totals 4,500,000 $ 4,600,000 AQUA CITY INVESTMENT TRUST FUND TRANSACTIONS FOR CURRENT FISCAL YEAR Set up the investment trust fund by recording the appropriate amounts of securities that are being given to the investment trust fund by the participants. Assume that of the amounts shown, the General Fund's and Water City's investments were all in certificates of deposit (CDs), half of the School District's and Township's investments were in CDs, and the remaining amounts for the School District and Township were in U.S. Treasury notes. CDs that had been recorded in the amount of $1,250,000 matured and the pool received $1,325,000 in cash at maturity. $750,000 of this amount was reinvested in CDs. The School District withdrew $300,000 in funds needed for operations. The Township withdrew $250,000 in funds at the same time. Participant interest percentages need to be recalculated at this time. (d) Interest on Treasury notes in the amount of $40,000 was collected. The Township invested an additional $150,000 in the investment trust fund. Participant interest percentages need to be recalculated at this time. (f) Interest accrued on CDs at year end amounted to $42,500. The Treasury notes increased in value by $15,000 as of the end of the fiscal year. (h) At the end of the year, it was decided to compute and record the pool's liability or net assets held for each of the four participants for its appropriate proportionate share of earnings on the pooled investments. Be sure to take into account the interest percentages that are in effect at the time the earnings are received or recorded. Problem 1 (25 points). The city council of Aqua City decided to pool the investments of its General Fund with those of Aqua School District, Aqua Township, and Water City. Each of these entities carried its investments at fair value as of the prior balance sheet date. All investments will be revalued to current fair value at the date of the creation of the pool. At that date, the prior and current fair values of the investments for each of the participants were as indicated on the attached schedule. The transactions relating to the investment trust fund for the current fiscal year are attached. It has been agreed that the allocation of earnings will be based on the participants' share of the investment trust fund at the time the earnings are received by the fund but before they are distributed to the participants. REQUIRED: (1) Prepare general journal entries, in proper form, to record the above transactions for the Aqua City Investment Trust Fund. Use the letter of the transaction for the date. Omit explanations. Round all percentages for the participants shares to two decimal places (four decimal places in all) and all dollar amounts to the nearest whole dollar. Prepare general journal entries, in proper form, to record those transactions that should be made by Aqua Township in its General Fund that relate to this investment trust fund. (2)