Chapter 8 Recording Transactions Affecting a Fiduciary Funda TaxAgency Fund

The City of Smithville administers a tax agency fund that bills and collects property taxeslevied by the governing bodies of the Smithville Consolidated School District (CSD), SmithCounty, and the Smith County Fire Protection District (FPD), in addition to those levied bythe City of Smithville for its General Fund. (Note: Beginning in FY 2015, the tax agencyfund will also account for property tax billing and collection for the City of Smithvilles debtservice fund. That fund will not levy property taxes for FY 2014.) As permitted by state law,the City of Smithville charges a collection fee of one percent of all taxes collected for theother governments.

CITY OF SMITHVILLETax Agency FundPost-closing Trial BalanceAs of December 31, 2013

Account Title

Debits Credits

Taxes Receivable for Other Funds and $2,317,075 GovernmentsDelinquent (including related interest and penalties)

Due to Other Funds and Governments $2,317,075 Totals

$2,317,075 $2,317,075

Required

a. Open a general journal as of December 31, 2013, for the Tax Agency Fund by entering thetwo accounts and amounts shown in the above post-closing trial balance. Enter 2013 fromthe 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 asyour paragraph number in the [Transaction Description] box. Verify the accuracy of yourjournal entry and post it to the general ledger by clicking [Post Entries]. Unless yourinstructor specifies e-mail submission, print a post-closing trial balance as of December 31,2013 and retain it in your cumulative file until directed by your instructor to submit it. (Note: Entries in this fund do not have to be recorded at the government-wide level.Fiduciary activity information is reported only in the fiduciary fund statements and notat the government-wide level.)

b. The following schedule shows the tax rates that have been established by the various taxingauthorities for fiscal year 2014.

Tax Rates Applicable to Governments Served by the Tax Agency FundFiscal Year 2014(All amounts rounded to next higher dollar)

Tax Rate

(Per $100 Assessed TaxGovernments/Funds of Assessed Valuation) Valuation Levy

City of Smithville: General Fund

$0.56 $303,035,714 $1,697,000

Total city rate and levy $0.56

$1,697,000

Smithville CSD: General Fund

$2.45 $365,090,450 $8,944,717

Debt service fund 0.14

511,127

Total CSD rate and levy $2.59

$9,455,844

Smith County: General Fund

$0.27 $458,672,260 $1,238,416

County Road and Bridge Fund 0.33

1,513,619

Total county rate and levy $0.60

$2,752,035

Smith County FPD: General Fund

$0.90 $155,336,546 $1,398,029

Fire Station Construction Fund 0.35

543,678

Total county FPD rate and levy $1.25

$1,941,707

Grand Total tax rates and levies* $5.00

$15,846,586

* 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 totalamounts billed by the Tax Agency Fund to all taxpayers in each jurisdiction. Record the following transactions that occurred during 2014 in the general journal of the TaxAgency Fund. Please remember that before closing the City of Smithville, you must click on[File], and [Save/Save As] to save your work. Your work is NOTautomatically saved.

1. [Para. 8-b-1] On January 2, 2014, the citys tax administrator mailed annual tax bills toall property owners in the total amount of $15,846,586 (see preceding table). The taxadministrator maintains a detailed tax ledger to track amounts billed to and collectedfrom each taxpayer and total amounts applicable to each fund and government. Youneed only record the grand total amount shown in the schedule above in the generaljournal, as illustrated in Chapter 8 of the Reck, Lowensohn, and Wilson text.2. [Para. 8-b-2] Delinquent taxes and related interest and penalties were collected duringthe year for the taxing authorities shown below:

Delinquent Interest and Governments/Funds:

Taxes Penalties TotalCity of Smithville General Fund $ 360,000 $ 34,270 $ 394,270

Smithville CSD

722,650 57,810 780,460

Smith County

285,410 22,830 308,240Smith County FPD 162,560 13,050 175,610

Total collected

$1,530,620 $127,960 $1,658,580

Required: Record the collections of delinquent taxes and interest and penalties byrecognizing specific liabilities to each fund or government. The 1 percent collection feeshould be deducted from the amounts due to other governments; the total amountdeducted from other governments should be added to the amount due to the City ofSmithville General Fund. (Note: Round all amounts to the nearest whole dollar.) Makethese entries only in the Tax Agency Fund general journal. The Tax Agency Fundrecords the total amount of delinquent taxes and related interest and penalties in theTaxes Receivable for Other Funds and GovernmentsDelinquent account. (Note: Allcash receipts and collection fees were recorded in earlier chapters in the journals for theGeneral Fund and governmental activities at the government-wide level. The collectionfees, though not separately identified, were included in RevenuesCharges for Servicesin the General Fund and in Program RevenuesGeneral GovernmentCharges forServices in governmental activities.)3. [Para. 8-b-3] All cash collected in paragraph 8-b-2 was transferred to the other fundsand governments in the amounts calculated, adjusted for collection fees deducted oradded (see Para. 8-b-2).4. [Para. 8-b-4] Current taxes were collected during the year for the funds andgovernments shown below:

Current Taxes Funds/Governments: Collected City of Smithville General Fund $ 1,546,800 Smithville CSD

8,510,260

Smith County

2,476,830

Smith County FPD 1,747,540

Total collected $14,281,430

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

5. [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.

6. [Para. 8-b-6] Taxing authorities notified the tax administrator that delinquent propertytaxes in the amount of $177,400 and related interest and penalties in the amount of$18,900 ($196,300 in total) have been written off as uncollectible. Record the totalamounts in the general journal by debiting Due to Other Funds and Governments andcrediting Taxes ReceivableDelinquent for Other Funds and Governments. (Note: Thetax administrator updates the detailed tax ledger records for these write offs.)

7. [Para. 8-b-7] Make the year-end journal entry to reclassify all uncollected current taxesas delinquent and to record a receivable for interest and penalties of 8 percent on thereclassified amount (round amount to nearest whole dollar). The interest and penaltiesportion of the total amount should be debited to Taxes Receivable for Other Funds andGovernmentsDelinquent and credited to Due to Other Funds and Governments. Youneed only record the aggregate amounts reclassified in the general journal; the taxadministrator will update the detailed tax ledger records for these reclassifications. c. Go to [Reports] and print the post-closing trial balance for the Tax Agency Fund as ofDecember 31, 2014. Retain in your cumulative folder until directed by your instructor tosubmit them, unless your instructor specifies submission of computer files via e-mail, inwhich case you will need to save a .pdf version of your trial balance. Retain the post-closing trial balance as of December 31, 2014, and the statement offiduciary net position in your cumulative folder, unless your instructor requests e-mailsubmission of your documents.