Exam 8: Accounting for Fiduciary Activities Agency and Trust Funds

If a state or local government acts as an intermediary between the federal government and beneficiary recipients in processing grant or entitlement resources,those resources should be accounted for in an agency fund.

Explain the purpose of an investment trust fund and describe its accounting treatment.

As of January 1,2011,the Town of Bartonville notified the Barton County Investment Pool that it needed to withdraw $1,000,000 cash from the pool,so the manager sells investments on January 2 to obtain the required $1,000,000 cash.The investments sold had been carried in the Investment Trust Fund accounts at a fair value of $970,000. Required 1)Show the entry for the sale of investments by the pool on January 2,2011. 2)Show the entry for the distribution of the gain on investments sold,assuming the Town of Bartonville's equitable share of the pool before the withdrawal of cash was 50 percent. 3)Show the entry for the Pool's payment of $1,000,000 to the Town of Bartonville.

Public employee retirement systems should label the difference between assets and liabilities on the statement of plan net assets as "fund balance available for member benefits."

The following are key terms in Chapter 8 that relate to accounting for pension plans. A.Actuarial accrued liability B.Actuarial present value of total projected benefits C.Actuarial value of assets D.Annual required contributions E.Net pension obligation F.Normal cost G.Unfunded actuarial liability For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition

Which of the following activities would most appropriately be recorded by an agency fund?

It is common for an agency fund to have relatively small net asset balances.

Effective management of cash and investments of individual funds may be enhanced by placing the cash and investments in a pool under the control of the treasurer of the government or other official.

A donor contributed $100,000 to the city stipulating that the money be invested and that the earnings thereon be used for maintenance of the city municipal swimming pool.The $100,000 would most appropriately be recorded in a(an)

Grant City has held investments over a period of time for Grant Township in an investment pool,accounted for as an investment trust fund.The investments carried at fair value on July 1,2011 were $500,000 (cost totaled $460,000).On July 1,2011,the Grant School District received the proceeds of a general obligation bond sale at par in the amount of $9,500,000.It is expected that about 20 percent of this amount will need to be disbursed within the last six months of the current year,about 50 percent during the year after that,and the remainder in the third year of the project.The interest received on investment of the bond proceeds belongs to the Grant schools.This money was invested in the Grant Investment Pool.No other governmental entities have significant amounts of cash or investments as of July 1,2011. Required 1)What percentage interest in the pool is held by the school district and the township? Explain your answers; show computations in good form. 2)Assuming that the cash received by the pool from Grant schools was invested promptly and that those investments were managed in the same manner as the township's investments in the pool,and that the earnings on pooled investments in the six months ended December 31,2011,were $300,000 (all received in cash; no accrued interest receivable): (a)Show the entry in the Investment Trust Fund to summarize the collection of interest for the six-month period. (b)Show the entry in the Investment Trust Fund to record the liability to the funds for interest earned on pooled investments.

A local golfer contributed $100,000 to the city stipulating that the money be invested and that the earnings thereon be used for maintenance of the city golf course.The $100,000 would most appropriately be recorded in a(an)

Explain the difference between an internal cash and investments pool and an external cash and investment pool and describe some of the differences in accounting treatment between the two.

Public employee retirement systems should utilize budgetary accounts in the same manner that General Funds and special revenue funds should.

In which of the following circumstances would it be inappropriate to report the assets in the fiduciary fund financial statements?

When a cash and investments pool is created,the assets of each fund entering the pool should be transferred to the pool at their fair value at the date of the transfer.

Employer (and employee,if applicable)contributions to public employee retirement systems should be based on actuarial computations.