Chapter 15, Problem 4E

To determine

Concept introduction

The key part of a business is the government. The governmental funds are termed as the general funds. Accounting and financial reporting of the general funds becomes more important with increasing economy. There are two types of financial organizations in this category, governmental and not-for-profit entities. Budgeting helps to obtain optimal resource allocations to those entities and manage them efficiently.

To prepare: Entries in the general fund for the 2018 events.

Explanation of Solution

The journal entries for the events in 218 are as follows.

1 The record of money borrowed.

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
January, 2018	Cash (A+)		275,000
	Tax Anticipation Notes Payable (L+)			275,000

Cash is an asset and will lead to increase in the asset value in the balance sheet. Therefore, it is debited. While the tax anticipation notes payable is a liability and will increase the liability value in the balance sheet. Therefore, it is credited.

2 The record of collection of taxes liens is as below.

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
February, 2018	Cash (A+)		12,000
	Tax Liens Receivable (A-)			10,000
	Revenues (SE+)			2,000

Record of the sale property.

Find the balance tax liens receivable.

  $\begin{array}{c}\text{Balance Tax Liens Receivable}=\left[\begin{array}{l}\text{Beginning balance of Tax Liens Receivable}-\\ \left(\begin{array}{l}\text{Cash Received on Tax Liens+}\\ \text{Collected Tax Receivable on sale of property}\end{array}\right)\end{array}\right]\\ =40,000-\left(10,000+13,000\right)\\ =17,000\end{array}$

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
February, 2018	Allowance for the uncollectible Tax Liens		23,000
	Tax Liens Receivable			17,000
	Revenues			6,000

3 The collection of delinquent property taxes. The journal entry will be as below.

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
April, 2018	Cash (A+)		104,500
	Delinquent Property Tax Receivable (A-)			100,000
	Revenues (SE+)			4,500

Record of the transfer of delinquent property taxes on tax liens.

Find the balance tax liens receivable.

  $\begin{array}{c}\text{Balance Tax Liens Receivable}=\left[\begin{array}{l}\text{Beginning balance of Tax Liens Receivable}-\\ \left(\begin{array}{l}\text{Cash Received on Tax Liens+}\\ \text{Collected Tax Receivable on sale of property}\end{array}\right)\end{array}\right]\\ =40,000-\left(105,500+100,000\right)\\ =35,000\end{array}$

The record on journal will be as below.

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
April, 2018	Allowances for Uncollectible Delinquent Taxes		104,500
	Delinquent Property Tax Receivable (A-)			100,000
	Revenues (SE+)			4,500

4 Record of current property tax levy.

Calculate allowance for property taxes.

  $\begin{array}{c}\text{Allowance for property taxes}=\left(\begin{array}{l}\text{Current property taxes levied}\times \\ \text{Allowances for uncollectible amounts}\end{array}\right)\\ =422,000\times \frac{5}{100}\\ =21,000\end{array}$

The entry journal will be as follows.

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
July, 2018	Property Taxes Receivable		422,000
	Allowance for Property Taxes Receivable			21,100
	Revenues (SE+)			400,900

5 Record the collection of property taxes.

The journal entry will be as below.

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
September, 2018	Cash (A+)		345,000
	Property Taxes Receivable			345,000

The entry of record of the pay-off tax anticipation notes will be as follows

Date	Accounts Title and Description	Post Ref.	Debit ($)	Credit ($)
September, 2018	Tax Anticipation Notes Payable		275,000
	Expenditures		18,000	21,100
	Cash (A-)			293,000