On January 1, Forrester County is holding investments for Tinsel Town valued at
ID: 2451828 • Letter: O
Question
On January 1, Forrester County is holding investments for Tinsel Town valued
at $500,000 in an investment pool, accounted for in an investment trust
fund. On January 1, Valley School District invests $1,500,000 in the pool.
Earnings on pooled investments for the six months ended June 30 totaling
$300,000 were received in cash.
Required
1) What percentage interest in the pool is held by the town and the school
district?
2) (a) Show the entry in the Investment Trust Fund to record the School
District’s investment in the pool.
(b) Show the entry in the Investment Trust Fund to summarize the collection
of interest for the six-month period.
(c) Show the entry in the Investment Trust Fund to record the liability to the
funds for interest earned on pooled investments, assuming that the interest will
be paid to the town and school district.
(d) Independent of part (c), show the entry in the Investment Trust Fund to
record the distribution of the interest earned on pooled investments, assuming
that the interest will be reinvested by the town and school district.
Explanation / Answer
1) Percentage interest in the pool is held by the town and the school district
Earning on Investment / Investment Amount
Interest in the pool is held by the Town = $300000 / $500000 * 100 = 60%
Interest in the pool is held by the School = $300000 / $1500000 * 100 = 20%