[Oimie]

Can someone please answer these questions I am having?

The following information is relevant to one of the City of Mullins’ General Fund’s derived tax revenues:

QUESTION 1:

Fiscal year-end: June 30

Beginning receivables $450,000

Beginning deferred revenues 100,000

Beginning allowance for doubtful accounts 50,000

Receipts 1,250,000

Ending receivables 600,000

Receivables collected 6/30 – 8/30 125,000

Ending allowance for doubtful accounts 60,000

The City of Mullins considers derived tax receivables collected within 60 days after the close of the fiscal year to be “available.” Furthermore, the City wrote off $30,000 of receivables as uncollectible during the year.

What would be the amount of revenues reported at the fund level?

Answer: 1,075,000

Explanation:

Beginning receivable 450,000

Less beginning deferred revenue: (100,000)

Less beginning doubtful accounts: (50,000)

= Prior year revenue: 300,000

Current year receipts: 1,250,000

Less prior year revenue: (300,000)

Plus 60 days available: 125,000

= Current year revenue: 1,075,000

My question is, why is beginning receivable 350,000 (450,000-100,000) considered last year’s income? And whatever the answer is, then why isn’t the 600,000 receivables added to this years income?

QUESTION #2:

The following information pertains to Comb City:

Year 3 real estate property taxes assessed and collected in Year 3: 14,000,000

Year 2 real estate property taxes assess in Year 1 and collected in Year 3: 1,000,000

Year 3 sales taxes collected by merchants in Year 3 but not required to be remitted to Comb until January of Year 4: 2,000,000

For the year ending December 31, Year 3, Comb should recognize revenues of:

Answer is $14,000,000 + $1,000,000 + $2,000,000 = $17,000,000

My question is, why is the 1,000,000, year 2’s property taxes included in year 3’s revenues? Property taxes are one of those exceptions where the revenues are recognized when it is billed + 60 days after the end of the fiscal year. The problem doesn’t state when it was collected, so how are we suppose to know whether it’s revenue for year 2 or year 3?

FAR 85 June 2015
AUD 80 Nov 2015
REG 83 Nov 2015
BEC 79 Feb 2016