Question

Date Account Name Debit Credit 3. On the last day of the calendar year, the City of Cammieton borrowed $400,000 from the local bank as a short-term loan in anticipation of property tax collections in the month of January. The note is non-interest bearing, due in 30 days, and is discounted as a rate of 12% per year. Record this transaction from two perspectives: 1) from the governmental activities' perspective on the government-wide statements, and 2) from the General Fund perspective. (1) From the governmental activities' perspective: Date Account Name Debit Credit (2) From the General Fund perspective Date Account Name Debit Credit

can you show the entries and how you got them please. thank you

Answer 1

1. From government activity perspective

31Dec. Bank A/c............................Dr 396,000

31Dec. Discount on bank note.......Dr 4,000

31Dec. Bank note.........................Cr 400,000

[Regarding Bank note taken on discount @1% per month (ie 12%/12months)]

31Dec Discount on bank note..........Dr 4,000

31Dec PL account.............................Cr 4,000

[Discount treated as an expense]

2. From general fund perspective

31Jan Property tax receivable..............Dr 400,000

31Jan Revenues....................................Cr 400,000

[Regarding revenue to be recieved in Jan]