Question

During the current year, the Town of Salo Alto recorded the following transactions related to its property taxes:

a. Levied property taxes of $3,300,000, of which 2 percent is estimated to be uncollectible.
b. Collected current property taxes amounting to $2,987,500.
c. Collected $26,500 in delinquent taxes and $2,400 in interest and penalties on the delinquent taxes.
d. These amounts had been recorded as Deferred Inflows of Resources in the prior year.
e. Imposed penalties and interest in the amount of $3,750 but only expects to collect $3,100 of that amount. None is expected to be collected this year or within 30 days of year-end.
f. Reclassified uncollected taxes as delinquent. These amounts are not expected to be collected within the first 60 days of the following fiscal year.

Required:
Prepare the journal entries.

Answer 1

S/N Account Titles & Explanation Debit Credit

1) Taxes Receivable—Current $3,300,000

Estimated Uncollectible Current Taxes $66,000

Revenues $3,234,00

2) Cash $2,987,500

Tax Receivable-current $2,987,500

3) Cash $28,900

Tax Receivable- Delinquent $26,500

Interest and Penalties Receivable On Taxes $2,400

4) Penalties and Interest Receivable $3,750

Estimated Uncollectible Interest $650

and Penalties

Revenues $3,100

5) Taxes Receivable- Delinquent $312,500

($3300000-$2987500)

Estimated Uncollectible Current Taxes $66,000

Taxes Receivable- Current $312,500

Estimated Uncollectible Delinquent Taxes $66,000