Question Completion:
Prepare the journal entries.
Answer:
Town of Salo Alto
Journal Entries:
Debit Property Taxes Receivable $3,300,000
Credit Unearned Property Taxes $3,300,000
To record the levying of property taxes.
Debit Uncollectible Expense $66,000
Credit Allowance for Uncollectible Property Taxes $66,000
To record the 2% allowance for uncollectible taxes.
Debit Cash $2,987,500
Credit Property Taxes Receivable $2,987,500
To record the collection of current property taxes.
Debit Cash $28,900
Credit Deferred Inflows of Resources $26,500
Credit Interest and Penalties $2,400
To record the collection of delinquent taxes with interest and penalties.
Debit Penalties and Interest Receivable $3,750
Credit Interest and Penalties $3,100
Credit Allowance for uncollectible $650
To record penalties and interest imposed.
Debit Deferred Inflows of Resources $312,500
Credit Property Taxes Receivable $312,500
To re-classify uncollected taxes as delinquent.
Explanation:
The ASC 606, as applicable to GASB, specifies when property tax revenues should be recognized in government-wide financial statements. Governmental revenue, e.g. property tax revenue, should be considered as revenue in the current period if it can be collected within that period or sixty days after the current period. If it cannot be so collected, it needs to be re-classified as delinquent.
