Author Question: (Property tax revenue recognition) In its General Fund balance sheet at December 31, 2013, ... (Read 107 times)

captainjonesify · **on:** Jul 5, 2018

(Property tax revenue recognition)

In its General Fund balance sheet at December 31, 2013, Marathon City reported Property taxes receivable of 40,000, deferred property tax revenues of 15,000, and an allowance for uncollectible taxes of 0 .

At the start of the year 2014, Marathon City made the following journal entry to record its property tax levy:
Property taxes receivable 950,000
Allowance for refunds and uncollectible taxes 10,000
Revenues - property taxes 940,000

During the year 2014, the city collected all the property taxes receivable outstanding at December 31, 2013 . It also collected 920,000 of the receivables recognized at the beginning of 2014, and wrote off 6,000 of receivables against the allowance account. On December 31, 2014, the Marathon City finance director made the following determinations regarding the property taxes outstanding at that date:
a. All outstanding property taxes would be collected, so there was no need for the allowance for uncollectible property taxes.
b. The City would collect about 15,000 of the outstanding property taxes receivable during the first 60 days of 2015 and the remainder during the latter part of 2015.

Required: Calculate how much property tax revenues Marathon City should recognize in 2014

Question 2

If services for the month total 3,300 in cash and 700 on account, the cash account increases 700.
a. True
b. False
Indicate whether the statement is true or false

komodo7 · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

Recognize in 2014 the amount deferred in 2013 15,000
Recognize at time of 2014 tax levy 940,000 Recognize unused portion of allowance for uncollectible taxes 4,000
Defer recognition of portion of outstanding taxes that will not be
collected in first 60 days of 2015 (outstanding taxes of 24,000,
less 15,000 expected to be collected in first 60 days) (9,000)
Property taxes recognized in 2014 950,000

(Note: Alternative calculation: Deferred from 2013 15,000 plus collected in cash in 2014 920,000 plus collected in first 60 days of 2015 15,000 = 950,000)

Answer to Question 2

False