Upon the death of a police officer, Leff City establishes a trust fund to provide for the education of the

officer's college-age children.

1. In what type of fund should the resources contributed to the fund be recorded?

2. Prepare journal entries to record the transactions that follow:

a. City residents contribute a total of $500,000 in cash. Per the trust agreement, the funds are to be

invested in high-quality securities until requested by the beneficiary children. They can then be disbursed

to pay for tuition, room and board, and incidental expenses.

b. The city invests the securities in stocks and bonds.

c. The city earns interest and dividends of $35,000 and the fair value of the securities increases by

$40,000.

d. A beneficiary child requests that the city draw a check of $24,000 to Jackson College to cover her

first semester's tuition.

e. The city writes the check.

f. As permitted by the trust agreement the city bills, and collects from the trust fund $600 to cover

administrative costs.

3. Suppose that a fund were established by the city from tax dollars to provide scholarships for the

children of any police officer. Moreover, city officials were responsible for determining eligibility

requirements and determining the amounts that beneficiaries would receive. How, if at all, might your

response to #1 differ?