Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-15
Ch. 8, Solutions, Exercise 8-20 b. (Cont’d)
Debits Credits
4. DEDUCTIONS—PAYMENT OF PRINCIPAL TO
BONDHOLDERS 500,000
DEDUCTIONS—PAYMENT OF INTEREST TO
c. Assets and liabilities of the special assessment custodial fund would be
combined with other custodial funds of the reporting entity and appear in a
separate column on the statement of fiduciary net position. Additionally,
d. Since the City of Foothills is not obligated in any manner for the Green
Acres special assessment debt, the debt should not be reported in
General Problem Information: Special Assessment Debt
Learning Objective: 8-2
Topic: Custodial Funds
Bloom’s Taxonomy: Apply
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-16
Ch. 8, Solutions, Exercise 8-20 (Cont’d)
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Financial
Reporting
Level of Difficulty: Medium
8-21. Fiduciary funds are described in a, c, d, f, i, and j. See explanations for
each fund type below.
a. Tri-Centennial Fund. This is a private-purpose trust fund since the
resources will benefit a broad constituency rather than just the citizens
of the city.
b. Perpetual Care Fund. This describes a permanent fund as the principal
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-17
Ch. 8, Solutions, Exercise 8-21 (Cont’d)
General Problem Information: Identification of fiduciary funds
Learning Objective: 8-2, 8–3, 8-5
Topic: Custodial Funds, Pension Trust Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Critical Thinking
Level of Difficulty: Medium
8-22. a. GENERAL JOURNAL
Debits Credits
CITY OF ALBERTVILLE GENERAL FUND:
EQUITY IN POOLED INVESTMENTS 900,000
ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS 4,230,000
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-18
Ch. 8, Solutions, Exercise 8-22 a. (Cont’d)
Debits Credits
RICHWOOD TOWNSHIP:
EQUITY IN POOLED INVESTMENTS 3,870,000
b. INVESTMENT POOL TRUST FUND:
1. U.S. TREASURY NOTES 900,000
CERTIFICATES OF DEPOSIT 8,100,000
2. U.S. TREASURY NOTES 30,000
DUE TO GENERAL FUND 3,000
ADDITIONS⎯INVESTMENT EARNINGS⎯
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-19
Ch. 8, Solutions, Exercise 8-22 b. (Cont’d)
Debits Credits
3. CASH 50,000
4. ACCRUED INTEREST RECEIVABLE 28,000
5. UNDISTRIBUTED EARNINGS ON
POOLED INVESTMENTS 78,000
DUE TO GENERAL FUND 11,700
COMPUTATION: City’s GF Schools Township TOTAL
EQUITY AT BEGINNING OF YEAR $900,000 $4,230,000 $3,870,000 $9,000,000
% INTEREST 10.00% 47.00% 43.00% 100.00%
c. CITY OF ALBERTVILLE GENERAL FUND:
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-20
Ch. 8, Solutions, Exercise 8-22 c. (Cont’d)
Debits Credits
ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS 14,100
REVENUES⎯INVESTMENT EARNINGS 14,100
RICHWOOD TOWNSHIP:
d. CITY OF ALBERTVILLE GENERAL FUND:
ALBERTVILLE SCHOOLS:
EQUITY IN POOLED INVESTMENTS 54,990
REVENUES⎯INVESTMENT EARNINGS 54,990
RICHWOOD TOWNSHIP:
e. The investment trust fund would not report the General Fund’s interest in the
pool since the General Fund is an internal participant. The General Fund
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-21
Ch. 8, Solutions, Exercise 8-22 (Cont’d)
General Problem Information: Investment trust fund
Learning Objective: 8-3
Topic: Investment & Private–purpose Trust Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Financial
Reporting
Level of Difficulty: Hard
8-23.
a. EVERGREEN COUNTY
PASS-THROUGH CUSTODIAL FUND
GENERAL JOURNAL
Debits Credits
CASH 5,000,000
DUE TO CITY OF BOULDER 2,100,000
DUE TO ASPEN TOWNSHIP 1,400,000
DUE TO SNOWTON 900,000
DUE TO FIRTREE VILLAGE 600,000
Note: Since the cash received is immediately disbursed, the county could
opt to eliminate the recognition of the liability and recognize the addition on
receipt and the deduction on distribution. However, these are two separate
transactions that require recognition of the amounts due to each grant
recipient; therefore, in this problem the liability is initially established.
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-22
Ch. 8, Solutions, Exercise 8-23 (Cont’d)
Debits Credits
b. Aspen Township Performing Arts Capital Projects Fund
CASH 1,400,000
REVENUES 1,400,000
Aspen Township Governmental Activities
c. Since the transactions are recorded in a custodial fund, they would not be
General Problem Information: Pass-through custodial funds
Learning Objective: 8-2
Topic: “Pass–through” Custodial Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Financial
Reporting
Level of Difficulty: Hard
8-24. Some of the errors noted include:
• Each type of fiduciary fund should be reported in a separate column.
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-23
Ch. 8, Solutions, Exercise 8-24 (Cont’d)
• Investments are to be reported at fair value. There needs to be an
indication as to whether investments are being reported at fair value.
• While a trust fund may have capital assets and a lease obligation,
any capital assets would be reported net of depreciation rather than
General Problem Information: Fiduciary financial statements
Learning Objective: 8-4
Topic: Illustrative Financial Statements
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge application, AICPA: Critical thinking
Level of Difficulty: Hard
8-25. Some of the errors noted include:
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-24
Ch. 8, Solutions, Exercise 8-25 (Cont’d)
• Each trust fund type should have a separate column; thus, there
instead of Other Trust Funds there should be a column for
fund or the investment trust fund would not be shown on the
statement of changes in fiduciary net position.
• Tax collections are not contributions and should be shown on a line
separate line above total additions.
• Unrealized gains are generally not reported as such by the
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-25
Ch. 8, Solutions (Cont’d)
8-26.
2020
2019
2018
Total pension liability
Service cost
123,225
$
125,440
$
127,950
$
Interest
189,730
182,580
169,960
Differences between expected and actual experience
1,250
(850)
625
Benefit payments (including refunds of
employee contributions)
(248,000)
(231,580)
(217,960)
Net change in total pension liability
66,205
75,590
80,575
Total pension liability, beginning
2,083,715
2,008,125
1,927,550
Total pension liability, ending
2,149,920
2,083,715
2,008,125
Plan fiduciary net position
Contributions—employee
32,450
$
36,240
$
30,170
$
Contributions—employer
98,620
102,530
91,550
Net investment income
18,990
(12,380)
(21,510)
Benefit payments (including refunds of
employee contributions)
(64,500)
(42,780)
(51,330)
Administrative expenses
(3,290)
(3,110)
(2,840)
Net change in plan fiduciary net position
82,270
80,500
46,040
Plan fiduciary net position, beginning
1,138,220
1,057,720
1,011,680
Plan fiduciary net position, ending
1,220,490
1,138,220
1,057,720
Net pension liability, ending
929,430
$
945,495
$
950,405
$
Plan fiduciary net position as a percentage
of total pension liability
56.77%
54.62%
52.67%
Covered payroll
502,160
$
485,218
$
489,810
$
Net pension liability as a percentage of
covered payroll
185.09%
194.86%
194.04%
BLUFF COUNTY EMPLOYEE RETIREMENT SYSTEM
SCHEDULE OF CHANGES IN THE COUNTY‘S NET PENSION LIABILITY AND RELATED RATIOS
LAST 3 FISCAL YEARS
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
8-26
Ch. 8, Solutions, Exercise 8-26 (Cont’d)
(a) 66,205 − [123,225 + 1,250 − 248,000] = 189,730
(b) 2,083,715 + 66,205 = 2,149,920
(c) 32,450 + 98,620 + 18,990 − 64,500 − 3,290 = 82,270
(d) 1,220,490 − 82,270 = 1,138,220
(e) 1,220,490/2,149,920 = .5677
General Problem Information: Pension calculations
Learning Objective: 8-5
Topic: Pension Trust Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge application, AICPA: Critical thinking
Level of Difficulty: Hard
8-27.
1. c. 5. d.
General Problem Information: Investment risk exposure
Learning Objective: 8-7
Topic: Appendix—Managing Investments
Bloom’s Taxonomy: Apply
Chapter 08 – Accounting for Fiduciary Activities—Custodial and Trust Funds
Ch. 8, Solutions, Exercise 8-27 (Cont’d)
Accreditation Skills tag: AACSB: Knowledge application, AICPA: Critical thinking
Level of Difficulty: Medium