The City of Melvin

| June 29, 2015

The City of Melvin received a gift of $2,500,000 from a local resident on April 1, 2012 and signed an agreement that the funds would be invested on a permanent basis and the income would be used to purchase books for the city library. The following transactions took place during the fiscal year ended Dec 31, 2012.

a. The gift was recorded on the books on April 1.

b. On April 1, 2012, the PRZ Co. bonds were purchased in the amount of $2,500,000, at par. The bonds carry an annual interest rate of 5 percent, payable semiannually on October 1 and April 1.

c. On October 1, the semiannual interest was received.

d. From October 1 through December 1, payments were made totaling $35,000 to purchase books for the city library.

e. On December 31, an accrual was made for interest.

f. After a review of the bond market on December 31, 2012, the bonds had a market value of $2,511,000, exclusive of accrued interest.

g. The books were closed on December 31.

Required

a. Record the transactions on the books for Library Book Permanent Fund.

b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the Library Book Permanent Fund for the year ended December 31, 2012.

c. Prepare the Balance Sheet for the Library Book Permanent Fund for the year ended December 31, 2012.

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Business Ethics – Business Management 2216

Category: Business Studies

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