The fiscal year of Duchess County ends on December 31. Property taxes are due on March 31 of the year in which they are levied. Prepare journal entries (excluding budgetary and closing entries) to record the following property tax‐related transactions in which the county engaged in 20X1 and 20X2. On January 15, 20X1, the county council levied property taxes of $170 million for the year ending December 31, 20X1. Officials estimated that 1 percent would be uncollectible. During 20X1, it collected $120 million. In January and February 20X2, prior to preparing its 20X1 financial statements, it collected an additional $45 million in 20X1 taxes. It reclassified as delinquent the $5 million of 20X1 taxes not yet collected. In January 20X2, the county levied property taxes of $190 million, of which officials estimated 1.1 percent would be uncollectible. During the remainder of 20X2, the county collected $2.5 million more in taxes relating to 20X1, $160 million relating to 20X2, and $1.9 million (in advance) applicable to 20X3. In December 20X2, it wrote off $1 million of 20X1 taxes that it determined would be uncollectible. Suppose the county were to prepare government‐wide statements and account for property taxes on a full accrual basis of accounting rather than the modified accrual basis. How would your entries differ? Explain.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 11E

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The fiscal year of Duchess County ends on December 31. Property taxes are due on March 31 of the year in which they are levied.

Prepare journal entries (excluding budgetary and closing entries) to record the following property tax‐related transactions in which the county engaged in 20X1 and 20X2.
1. On January 15, 20X1, the county council levied property taxes of $170 million for the year ending December 31, 20X1. Officials estimated that 1 percent would be uncollectible.
2. During 20X1, it collected $120 million.
3. In January and February 20X2, prior to preparing its 20X1 financial statements, it collected an additional $45 million in 20X1 taxes. It reclassified as delinquent the $5 million of 20X1 taxes not yet collected.
4. In January 20X2, the county levied property taxes of $190 million, of which officials estimated 1.1 percent would be uncollectible.
5. During the remainder of 20X2, the county collected $2.5 million more in taxes relating to 20X1, $160 million relating to 20X2, and $1.9 million (in advance) applicable to 20X3.
6. In December 20X2, it wrote off $1 million of 20X1 taxes that it determined would be uncollectible.
Suppose the county were to prepare government‐wide statements and account for property taxes on a full accrual basis of accounting rather than the modified accrual basis. How would your entries differ? Explain.

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Accrual basis journal entries refer to the financial transactions that are recorded in an accounting system using the accrual accounting method. In accrual accounting, transactions are recognized and recorded when they occur, regardless of whether cash is received or paid at the time.

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