Question

The Village of Frederick borrowed $1,000,000 from a local bank by issuing 4 percent tax anticipation notes. If the village repaid the tax anticipation notes six months later after collecting its next installment of property taxes, the General Fund journal entry to record the repayment will include:

Answer 1

Explanation:

The computation is shown below:

It records the two items i.e

Tax Anticipation Notes Payable = $1,000,000

And, the expenditure is recorded for

= Tax Anticipation Notes Payable × tax rate × number of months ÷ total number of months in a year

= $1,000,000 × 4% × 6 months ÷ 12 months

= $20,000

Both the above items are debited for $1,000,000 and $40,000 respectively