The controller of a school district had recorded the entire property tax levy, $20,000,000, as revenues when levied during the first month of the year. At year-end the auditor states that $3,000,000 must be reclassified as deferred revenues because that amount of the property tax levy will not be collected until more than 60 days into the next year or later. The controller objects, noting that the property tax receivables are as available as cash because the school district regularly uses them as the basis for borrowing on tax anticipation notes at local banks.
Furthermore, the penalties and interest charged on delinquent taxes exceed the interest charges on the tax anticipation notes. With whom do you agree? Why? If deferred revenues must be reported, explain how they are reported.