[leongl]

Becker Question –

Hello,

For the problem below, I understand that the property tax revenue should be 500k + 100k(first 60 days of the next year). However, the wording of the question ask for the net property tax revenue. Since uncollectible amount is 10k, wouldn’t net revenue be 600k-10k=590k? The answer is simply 600k. I thought the journal entry is:

Dr: Cash

Dr: Property tax receivable

Cr: Allowance

Cr: Revenue

any tips?

The following information pertains to property taxes levied by Oak City for the calendar year Year 1:

Collections during Year 1 $ 500,000

Expected collections during the first 60 days of Year 2 100,000

Expected collections during the balance of Year 2 60,000

Expected collections during January Year 3 30,000

Estimated to be uncollectible 10,000

Total levy $ 700,000

What amount should Oak report for Year 1 net property tax revenues in its fund financial statements?

a.

$500,000

b.

$700,000

c.

$600,000

d.

$690,000

Explanation

Choice “c” is correct. The net property tax revenues would include the $500,000 collections during the year plus the $100,000 expected collections within 60 days of year-end, for a total of $600,000. The remaining expected collections of $90,000 ($60,000 + $30,000) would be recorded as deferred inflows of resources, not revenues, under the modified accrual basis of governmental accounting for revenues. The $10,000 estimated to be uncollectible would not be considered since revenues are accounted for net of the estimated uncollectible amount.

Choice “b” is incorrect. The revenues account would include neither the $90,000 expected collections beyond 60 days after year-end nor the $10,000 uncollectible amount.

Choice “d” is incorrect. The revenues account would not include the $90,000 expected collections beyond 60 days after year-end.

Choice “a” is incorrect. The revenues account would include the $100,000 expected collections shortly after year-end (within 60 days).

[CPA_Chik]

General rule of thumb:

Fund financial statements = cash collected in the period + first 60 days of next period. Also keep in mind that cash collected in the first 60 days of the current period is often revenue from a previous period: 500+100=600k

Government-wide financial statements = regular accrual accounting, so all 1992 revenue regardless of when collected 700-10=690k

REG - 75!!!
FAR - 66; 73 (FML!!!)
AUD - 09/16
BEC - TBD

[Eiman.kuwait]

i got the same question in gleim test bank, in the question theres no mention whatsoever to whether theyre asking the property tax revenue for fund f/s or for gov wide f/s! so what to do in that case

[Author]

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