Baber city has held investments over a period of time for the Barber Township in an investment pool, accounted for as an investment trust fund. The investment carried at fair value on July 1, 2008 was $500,000. (Cost totaled $460,000).
On July 1, 2008, Baber 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% of this amount will need to be dispursed within the last six months of the current year, about 50% 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 Baber schools. This money was invested in the Baber City Investment Pool. No other governmental entities have significant amounts of cash or investments as of July 1, 2008.
1. What percentage interest in the pool is held by the school district and the township?
2. Assuming that the cash received by the pool from Baber schools was invested promptly and those investments were managed in the same manner as the township's investments in the pool, and the earnings on pooled investments in the six months ended Dec 31, 2008 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 into the Investment Trust Fund to record the liability to the funds for interest earned on pooled investments.