Question

The Edward City Council approved and adopted the budget for its general fund for the fiscal year beginning on January 1, Year 2. The budget contained the following amounts:

Estimated revenues $4,900,000
Appropriations 4,780,000

On November 1, Year 1, Edward City levied property taxes of $4,150,000 for the fiscal year beginning January 1, Year 2. It estimated that $25,000 will be uncollectible. Any payment of property taxes received during the discount period receives a 20% discount. During the discount period between the levy (October 15, Year 1) and the date (December 1, Year 1) that the levy became a legally enforceable claim, the city received $120,000 from property owners.

For each date below, select from the list provided the general fund accounts debited and credited for the journal entries for this property tax levy.
To prepare each required journal entry:

a. What is the journal entries for November 1, Year 1, if any?
b.What is the journal entries for November 30, Year 1, if any?
c. What is the journal entries for December 1, Year 1, if any?
d. What is the journal entries for January 1, Year 2, if any?

Answer 1

The journal entries for the property tax levy would include debits to the Accounts Receivable - Property Taxes Discounted, Property Taxes Receivable, Property Taxes Receivable - Uncollectible, and Cash accounts, and credits to the Property Taxes Receivable, Revenues - Property Taxes, and Allowance for Uncollectible Property Taxes accounts.

Step-by-step explanation:

The journal entries for the property tax levy would be as follows:

a. Journal entry for November 1, Year 1:

• Debit: Accounts Receivable - Property Taxes Discounted ($120,000 x 0.8 = $96,000)
• Credit: Property Taxes Receivable ($120,000)

b. Journal entry for November 30, Year 1:

• Debit: Property Taxes Receivable ($120,000)
• Credit: Revenues - Property Taxes ($120,000)

c. Journal entry for December 1, Year 1:

• Debit: Property Taxes Receivable - Uncollectible ($25,000)
• Credit: Allowance for Uncollectible Property Taxes ($25,000)

d. Journal entry for January 1, Year 2:

• Debit: Cash ($120,000)
• Credit: Property Taxes Receivable ($120,000)