Can someone help me understand when I should include the uncollectable accounts as part of “revenue” in Governmental? In one question:
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).
But then in the same Module, there is this question:
The City of Ocean Oaks estimates that five percent of its property tax revenues are uncollectible. The city typically levies and collects all taxes within the tax year that the tax revenue is intended to benefit. For the fiscal year ended June 30, Year 1, Ocean Oaks levied $2,000,000 in taxes and would record the following amounts as revenue and receivable:
Receivable Revenue
a.$2,000,000 $1,900,000
b.$2,000,000 $2,000,000
c.$1,900,000 $2,000,000
d.$1,900,000 $1,900,000
Explanation
Choice “a” is correct. Imposed tax revenues are recorded (accrued) as revenue when levied, subject to the measurable and available criteria. The property tax levy would be recorded as follows:
To record tax revenue from tax levy:
DR Property tax receivable $ 2,000,000
CR Estimated uncollectible taxes $ 100,000
CR Property tax revenue 1,900,000
.