Question

A town levied property taxes of $1,050,000 for its current calendar year on January 1 and set up an allowance of $30,000 for uncollectible taxes and an allowance of $20,000 for discounts on property taxes. How much should the village recognize as property tax revenues when it makes the journal entry on January 1 to initially record its property taxes receivable?

a. $1,050,000
b. $1,030,000
c. $1,020,000
d. $1,000,000

Answer 1

The village should recognize $1,000,000 as property tax revenues when it makes the journal entry on January 1.

Step-by-step explanation:

When the town makes the journal entry on January 1 to initially record its property taxes receivable, it should recognize the amount of property taxes collected minus the allowance for discounts and uncollectible taxes. The village should recognize $1,000,000 as property tax revenues when it makes the journal entry on January 1.

In this case, the property taxes collected are $1,050,000, and the allowances total $50,000 ($30,000 for uncollectible taxes and $20,000 for discounts). Therefore, the village should recognize $1,000,000 ($1,050,000 - $50,000) as property tax revenues.