On July 1, 2016, The Village assessed property taxes for the current period in t

Question

On July 1, 2016, The Village assessed property taxes for the current period in the amount of $700,000, and, based on past history, 2.5% of this will prove to be uncollectible. While most will be collected within the current period, it is estimated that $50,000 will be collected in the next fiscal year by August 31, 2017, and an additional $25,000 will be collected after that.

REQUIRED:

Prepare journal entries to record the above (include all necessary related entries EXCEPT closing and, for simplicity, assume use of cash for payments) in both the Fund-based and Government-wide financial statements. For Fund-based, designate the Fund; for Government-wide, designate the activity. If the entry is the same, you may write “same entry” for the second set of financials; if there is no entry, write “no entry.”

Explanation / Answer

Journal entry to record property taxes assessed for the current period for Fund Based accounting

Property taxes receivable $607,500

Allowance for Uncollectible taxes $17,500

Revenue $625,000

Property taxes receivables = $700,000 - $17,500 - $75,000 = $607,500

Allowance for Uncollectible taxes = $700,000 x 2.5% = $17,500

Property taxes estimated to receive next year and after that for an amount of $75,000 will be accounted as Estimated revenue in the Closing entry for Fund. and will not be included in revenue for the current period.

Journal entry to record property taxes assessed for the current period for Government wide accounting

Same Entry

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