A change to the full accrual basis may have little impact upon reported revenues. A city levies property taxes of $4 billion in June 2018 for its fiscal year beginning July 1, 2018. The taxes are due by January 31, 2019. The following (in millions) indicates actual and anticipated cash collections relating to the levy:
June 2018...............................................$ 100
July 2018 through June 2019......................$ 3,600
July 2019 through August 2019......................$ 80
September 2019 through June 2020................$ 150
The city estimates that $30 million will eventually have to be refunded, owing to taxpayer appeals of the assessed valuation of their property, and that $70 million will be uncollectible.
1. Prepare a journal entry that summarizes the city's property tax activity for the fiscal year ending June 30, 2019, based on:
a. The modified accrual basis (i.e., for fund statements)
b. The full accrual basis (i.e., for government-wide statements)
2. Indicate the differences in amounts that would be reported on both the statement of net position and the statement of activities on a full accrual basis.
3. Suppose that in the following year the tax levy and pattern of collections were identical to those of the previous year. What would now be the difference in amounts reported on the statement of net position and the statement of activities on a full accrual basis?