Situation B Discounts awarded for on-time payments.

1. On January 1, a city levies property taxes for the year of $5,500,000; $55,000 of the property taxes are expected to be uncollectible. Also, property owners who pay on or before the due date receive a discount of one-eleventh of their tax bill. It is expected that 80% of the taxes will be collected by the due date.
2. Taxes receivable of $4,400,000 are collected by the city on or before the due date. The balance of the taxes is declared delinquent.
3. The city writes off $55,000 of the delinquent taxes as uncollectible.
4. The remainder of the taxes 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.

Situation B:

#

Accounts

Dr.

Cr.

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

Allowance for Uncollectible TaxesCurrent................ xxxxxxxx

Allowance for Discounts on

Taxes .......................................................................... xxxxxxxx

RevenuesTaxes ........................................................... xxxxxxxx

To record tax levy

2a. Cash xxxxxxxxx

Allowance for Discounts on Taxes ....................................... xxxxxxxxx

Taxes ReceivableCurrent........................................... xxxxxxxxx

To record tax collections less discounts awarded

2b. Taxes ReceivableDelinquent............................................. xxxxxxxx

Allowance for Uncollectible TaxesCurrent....................... xxxxxxxx

Taxes ReceivableCurrent........................................... xxxxxxxxx

Allowance for Uncollectible TaxesDelinquent........... xxxxxxxxx

To reclassify delinquent taxes

3. Allowance for Uncollectible TaxesDelinquent.................. xxxxxxxx

Taxes ReceivableDelinquent...................................... xxxxxxxxx

To write off uncollectible receivables

4. Cash ................................................................................. xxxxxxxxxx

Taxes ReceivableDelinquent...................................... xxxxxxxxx

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