Question

A village levied property taxes of $910,000 for calendar year 2022 on January 1, 2022 and immediately set up an allowance of $10,000 for uncollectible taxes. The village collected $870,000 in cash during 2022. It expected to collect $22,000 of the unpaid taxes during the first 60 days of 2023 and an additional $8,000 during the rest of 2023. How much should the village recognize as property tax revenues in its 2022 General Fund financial statements?

a. $870,000
b. $892,000
c. $900,000
d. $910,000

Answer 1

The village should recognize $892,000 as property tax revenues for the calendar year 2022 in its General Fund financial statements, which includes $870,000 collected during the year and an additional $22,000 expected to be collected within the first 60 days of 2023.

Step-by-step explanation:

The question revolves around how much the village should recognize as property tax revenues in its 2022 General Fund financial statements. The village collected $870,000 in cash during 2022 and expected to collect $22,000 within the first 60 days of the following year, with an additional $8,000 afterwards.

According to the modified accrual basis of accounting, revenues should be recognized in the period they are available and measurable, meaning they are collected within the current period or soon enough thereafter to be used to pay current-period bills. In this case, the $22,000 expected to be collected within the first 60 days of 2023 meets the 'available' criterion, so it can be included in 2022's revenues. Therefore, the correct amount to recognize for 2022 is $870,000 collected plus the $22,000 expected to be collected, totaling $892,000.