Chapter 8 Recording Transactions Affecting a Fiduciary Funda Tax Agency Fund

The City of Smithville administers a tax agency fund that bills and collects property taxes levied by the governing bodies of the Smithville Consolidated School District (CSD), Smith County, and the Smith County Fire Protection District (FPD), in addition to those levied by the City of Smithville for its General Fund. (Note: Beginning in FY 2018, the tax agency fund will also account for property tax billing and collection for the City of Smithvilles debt service fund. That fund will not levy property taxes for FY 2017.) As permitted by state law, the City of Smithville charges a collection fee of one percent of all taxes collected for the other governments.

CITY OF SMITHVILLE

Tax Agency Fund

Post-closing Trial Balance

As of December 31, 2016

Account Title Debits Credits

Taxes Receivable for Other Funds and $1,977,075

GovernmentsDelinquent (including

related interest and penalties)

Due to Other Funds and Governments $1,977,075

Totals $1,977,075 $1,977,075

Required

Open a general journal as of December 31, 2016, for the Tax Agency Fund by entering the two accounts and amounts shown in the above post-closing trial balance.Enter 2016 from the drop-down [Year] menu. Each of the account titles will be found in the drop down menu [Account (# - Description)] in the [Journal] view of the program.Be sure to enter 8-a as your paragraph number in the [Transaction Description] box. Verify the accuracy of your journal entry and post it to the general ledger by clicking [Post Entries].Unless your instructor specifies electronic submission, print a post-closing trial balance as of December 31, 2016 and retain it in your cumulative file until directed by your instructor to submit it.

[Note: Entries in this fund are not recorded at the government-wide level. Fiduciary activity information is reported only in the fiduciary fund statements and not at the government-wide level.]

The following schedule shows the tax rates that have been established by the various taxing authorities for fiscal year 2017.

Tax Rates Applicable to Governments

Served by the Tax Agency Fund

Fiscal Year 2017

(All amounts rounded to next higher dollar)

Tax Rate

(Per $100 Assessed Tax

Governments/Funds of Assessed Valuation) Valuation Levy

City of Smithville:

General Fund $0.55 $314,727,270 $1,731,000

Total city rate and levy $0.55 $1,731,000

Smithville CSD:

General Fund $2.40 $370,931,790 $8,902,363

Debt service fund 0.12 445,119

Total CSD rate and levy $2.52 $9,347,482

Smith County:

General Fund $0.30 $370,931,790 $1,112,796 County Road and Bridge Fund 0.32 1,186,982

Total county rate and levy $0.62 $2,299,778

Smith County FPD:

General Fund $0.95 $155,336,546 $1,475,698

Fire Station Construction Fund 0.30 466,010

Total county FPD rate and levy $1.25 $1,941,708

Grand Total tax rates and levies^* $4.94 $15,319,968

^* Note: Each property owner will receive a tax bill equal to the tax rates of all taxing authorities that have jurisdiction over his/her property times the assessed valuation of his/her property. Shown above are the aggregate taxes levied by each government, which are also the total amounts billed by the Tax Agency Fund to all taxpayers in each jurisdiction.

Record the following transactions that occurred during 2017 in the general journal of the Tax Agency Fund.

Before closing the City of Smithville, click on [File], and [Save/Save As] to save your work. If you close the file by clicking on the [X] box you will be asked if you want to save your changes before closing.

[Para. 8-b-1] On January 2, 2017, the citys tax administrator mailed annual tax bills to all property owners in the total amount of $15,319,968 (see preceding table). The tax administrator maintains a detailed tax ledger to track amounts billed to and collected from each taxpayer and total amounts applicable to each fund and government. You need only record the grand total amount shown in the schedule above in the general journal, as illustrated in Chapter 8 of Reck and Lowensohn.

[Para. 8-b-2] Delinquent taxes and related interest and penalties were collected during the year for the taxing authorities shown below:

Delinquent Interest and

Governments/Funds: Taxes Penalties Total

City of Smithville General Fund $ 335,000 $ 34,270 $ 369,270

Smithville CSD 722,650 57,810 780,460

Smith County 459,980 41,400 501,380

Smith County FPD 162,560 13,050 175,610

Total collected $1,680,190 $146,530 $1,826,720

Required: Record the collections of delinquent taxes and interest and penalties by recognizing specific liabilities to each fund or government. The 1 percent collection fee should be deducted from the amounts due to other governments; the total amount deducted from other governments should be added to the amount due to the City of Smithville General Fund. (Note: Round all amounts to the nearest whole dollar.) Make these entries only in the Tax Agency Fund general journal. The Tax Agency Fund records the total amount of delinquent taxes and related interest and penalties in the Taxes Receivable for Other Funds and GovernmentsDelinquent account. (Note: All cash receipts and collection fees were recorded in earlier chapters in the journals for the General Fund and governmental activities at the government-wide level. The collection fees, though not separately identified, were included in RevenuesCharges for Services in the General Fund and in Program RevenuesGeneral GovernmentCharges for Services in governmental activities.)

[Para. 8-b-3] All cash collected in paragraph 8-b-2 was transferred to the other funds and governments in the amounts calculated, adjusted for collection fees deducted or added (see Para. 8-b-2).

[Para. 8-b-4] Current taxes were collected during the year for the funds and governments shown below:

Current Taxes

Funds/Governments: Collected

City of Smithville General Fund $ 1,561,535

Smithville CSD 8,412,730

Smith County 2,069,800

Smith County FPD 1,747,540

Total collected $13,791,605

Required: Record the collections of current taxes and recognize specific liabilities to each fund or government, after deducting the 1 percent collection fee from other governments and adding the total collection fee to the amount due the City of Smithville General Fund. Make these entries only in the Tax Agency Fund general journal.

[Para. 8-b-5] All cash collected in paragraph 8-b-4 was transferred to the other funds and governments, adjusted for collection fees deducted or added. (Note: For simplicity, Chapter 4 of Smithville did not address this collection of fees by the agency fund.)

[Para. 8-b-6] Make the year-end journal entry to reclassify all uncollected current taxes as delinquent. Add to the receivable amount interest and penalties of 4 percent on the reclassified amount (round amount to nearest whole dollar). The interest and penalties portion of the total amount should be debited to Taxes Receivable for Other Funds and GovernmentsDelinquent and credited to Due to Other Funds and Governments. You need only record the aggregate amounts reclassified in the general journal; the tax administrator will update the detailed tax ledger records for these reclassifications.