Chapter 8, Problem 18.7EP

  The city council of the City of Great Falls decided to pool the investments of its General Fund with those of Great Falls School District and Great Falls Township, each of which carried its investments at fair value as of the prior balance sheet date. All investments are revalued to current fair value at the date of the creation of the pool. At that date, the prior and current fair value of the investments of each of the participants were as follows:

 One day after creation of the pool, the investments that had belonged to Great Falls Township were sold by the pool for $1,760,000.

1. a.      The loss of $40,000 is borne by each participant in proportion to its equity in the pool.
2. b.      The loss of $10,000 is borne by each participant in proportion to its equity in the pool.
3. c.       The loss of $40,000 is considered to be a loss borne by Great Falls Township.
4. d.      The loss of $10,000 is considered to be a loss borne by Great Falls Township.