On December 31, 2020, the City of Lancaster Received a Gift

Essay

On December 31, 2020, the City of Lancaster received a gift of $25,000,000 to endow a new public library. Terms of the gift provide that the principal be held intact and invested in appropriate securities. The donor specifies that income is to be used for library acquisitions. The City uses a permanent fund to report this endowment.
On January 2, 2021, the gift was invested in securities having an annual yield of 2.5 percent. Library acquisitions costing $500,000 were made during 2021; $20,000 of these acquisitions remains unpaid at year-end, December 31, 2021. The securities have a value of $25,030,000 at year-end.
Required
a. Prepare appropriate journal entries (including closing entries) for 2021.
b. Present the fund financial statements for 2021.