Situation A Interest and penalties assessed on late payments.

1. On January 1, a county levies property taxes for the year of $5,000,000; $50,000 of the property taxes are expected to be uncollectible.
2. Before the due date, the county collects $4,000,000 of taxes. Interest and penalties of 10% are assessed on the uncollected taxes on the due date; 5% of the interest and penalties are expected to be uncollectible.
3. The county writes off $50,000 of delinquent taxes and $5,000 of interest and penalties receivable as uncollectible.
4. The remainder of the receivables is collected by year end.

Requirements

(a) Prepare the journal entries to record the transactions for each preceding situation

(b) Compute the amount of revenues to be reported for the year for each situation.

Requirement (a)

Situation A:

#

Accounts

Dr.

Cr.

1. Taxes ReceivableCurrent.................................................. xxxxxxxx

Allowance for Uncollectible TaxesCurrent................ xxxxxxxxx

RevenuesTaxes............................................................ xxxxxxxxx

To record tax levy

2a. Cash....................................................................................... xxxxxxxxx

Taxes ReceivableCurrent........................................... xxxxxxxxxx

To record tax collections

2b. Taxes ReceivableDelinquent............................................. xxxxxxxxx

Allowance for Uncollectible TaxesCurrent....................... xxxxxxxxx

Taxes ReceivableCurrent........................................... xxxxxxxxxx............................................................................. Allowance for Uncollectible TaxesDelinquent..................................................... xxxxxxxxxx

To reclassify delinquent taxes

2c. Interest and Penalties Receivable on Taxes.......................... xxxxxxxxx

Allowance for Uncollectible Interest

and Penalties............................................................... xxxxxxxxx

RevenuesInterest and Penalties.................................. xxxxxxxxx

To record assessment of interest and penalties

#

Accounts

Dr.

Cr.

3. Allowance for Uncollectible TaxesDelinquent.................. xxxxxxx

Allowance for Uncollectible Interest and Penalties............. xxxxxxx

Taxes ReceivableDelinquent...................................... xxxxxxxx

Interest and Penalties Receivable on Taxes................... xxxxxxxx

To write off uncollectible receivables

4. Cash ................................................................................. xxxxxxxx

Taxes ReceivableDelinquent...................................... xxxxxxxx

Interest and Penalties Receivable on Taxes................... xxxxxxxx

To record collections of receivables

Requirement (b)

Situation

A B

Collections of Property Taxes Levied for the Year:

Before the due date................................................................ $xxxxxxxxx $xxxxxxxxx

After the due date.................................................................. xxxxxxxx xxxxxxxx

Tax Revenues.................................................................. xxxxxxxxx xxxxxxxxx

Interest and Penalties Revenues:

Collections of interest and penalties revenues

levied for the year.......................................................... xxxxxxxx xxxxxxxxx

Total Revenues...................................................................... $xxxxxxxx $xxxxxxxx