On April 1, 2014, the Duval County School district received a $50,000 gift from

Question

On April 1, 2014, the Duval County School district received a $50,000 gift from a local civic organization with the stipulation that, on March 31 of each year, any interest earnings on the unspent principal be awarded as a scholarship to the 7th grade student with the highest academic average in mathematics over a 2 year period. A private-purpose trust fund, the Mathematics Scholarship Fund, was created. Record the following transactions on the books of the Mathematics scholarship Fund: On April 1, 2014, the gift was received and $30,000 in XYZ Bonds were purchased at par plus accrued interest. The bonds pay 6% interest semiannually on Jan. 1 and July 1.

Explanation / Answer

Assume the bond purchased at $x Accrued interest on Apr 1 for 90 days =x*6%*90/360 Taking 360 day year for interest calculation So x+x*6%*90/360= 30000 x=29556.65 So Bond purchase value= $     29,556.65 Accrued interest on Apr 1. $           443.35 Accounting Entry in Mathematics Fund A/c Date Account Title Dr $ Cr $ Apr 1.2014 Revenue-Donation         50,000.00 Cash         50,000.00 Investment in XYZ Bond         29,556.65 Accrued Interest               443.35 Cash         30,000.00

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