Question

1. The Village of Peek’s Kill enacted a budget that authorized the Peek’s Kill police department to spend $150,000 for supplies and equipment. Prepare journal entries to record the following transactions relative to that appropriation. Also, calculate the balance available for spending after the transactions occurred.

1. Placed purchase order (PO) A in the amount of $15,000 for police officer uniforms.
2. Placed PO B in the amount of $30,000 for a car for the chief of police.
3. Placed PO C in the amount of $7,000 for various training items, such as ammunition and targets.
4. The police chief received a call from the supplier of the car ordered. The supplier informed him that special bells and whistles were available for the sedan for $2,000. PO B (see Transaction 2) was amended, thereby increasing the PO to $32,000.
5. The uniforms ordered in PO A (see Transaction 1) were received, along with an invoice for $14,500. The invoice was approved for payment.
6. The invoice received in Transaction 5 was paid by the village comptroller.

2. The City of Weston is preparing its budget for calendar year 2020. After estimating revenues from all other sources, the City calculates that it must raise $7,000,000 from property taxes. You are given the following information regarding the tax rate:

            Property taxes to be collected                                                              $7,000,000

            Estimated uncollectible property taxes                                                  $70,707

            Total assessed value of property at beginning of 2020                   $65,000,000

            Expected reduction in assessed value from appeals                           $200,000

             Assessed value of City property, not subject to tax                           $1,400,000

            Adjustments to assessed values for senior citizen exemptions        $1,000,000

Required:

1. Compute the amount of property taxes required to be levied.
2. Compute the tax rate per $100 of net assessed valuation.
3. Determine the amount of property tax that a home owner whose property is assessed at $35,000 will have to pay.

3. The Town of Southwick Fire Department had the following transactions. Prepare journal entries to record them.

1. Placed a purchase order in the amount of $12,000 for department uniforms.
2. Placed a purchase order with a car dealer to replace the fire department’s attack truck. The expected cost of the truck is $92,000.
3. The fire attack truck was delivered to town officials with an invoice of $94,500. The invoice was approved and paid.
4. Unfortunately, some of the uniforms ordered in Transaction 1 were backordered and could not be shipped. However, uniforms that were expected to cost $8,000 were received along with an invoice for $7,900. The invoice was paid when received.
5. The remaining uniforms that were ordered in Transaction 1 were received. The invoice in the amount of $4,000 was paid.

**ALL THREE QUESTIONS ARE NOT RELATED**

Answer 1

Question 1

Step 1

In this question, details of POs placed have been given at first instance. There is no mention of advance payment if any. Under the circumstances, no journal entry is prepared on the basis of POs placed. However, details of POs placed are to be kept in record. Journal entry is prepared, when the material is received or payment is released.

Step 2

In the Question, Details of PO A, PO B, PO C are given. Payment of $ 14,500 made for PO A. Journal entry for this amount will be as under:

Uniform A/c    Dr $ 14,500

   Supplier A/C    Cr    $ 14,500

(On receipt of uniform and invoice against PO A)

Supplier A/c    Dr $ 14,500

Bank A/c Cr $ 14,500

( On payment against the invoice of PO A)

Step 3

Transaction 5 is not clear from the given Question. Hence it has not been considered in the solution.

Step 4

Thus against the Budget allocation of $ 150,000, commitment of only $ 53,500 ( !4,500 + 32,000 + 7,000) made and balance $ 96.500 is available for spending.

Question 2

Assessed value of the property $ 65,000,000

Less Expected reduction of the property value $    200,000

Balance value    $ 64,800,000

Less property not subject to tax $ 1,400,000

Less adjustment of value for senior citizen exemption $ 1,000,000

Total value of property to be taxed $ 62,400,000

Property tax to be collected    $ 7,000,000

Rate for property tax 7,000,000/62,400,000 11.22%

Thus property tax for $ 100 value $ 11.22

Tax for property valuing $ 35,000 $ 3927

Question 3

As explained in solution to Question 1 above, no journal entry is prepared on placement of PO.

Journal entry are prepared on receipt of material as below:

On receipt of Fire Truck and invoice:

Truck A/c Dr $ 94,500

Car Dealer A/C    Cr $ 94,500

(On receipt of Truck and invoice against PO for value of $ 95,000)

Car Dealer A/c    Dr $ 94,500

Bank A/c Cr    $ 94,500

( on payment to car dealer )

On receipt of uniform

Uniform A/c Dr $ 7,900

   Supplier A/c Cr $ 7,900

( on receipt of part delivery of uniform against PO for uniform or valuing $ 12,000)

Supplier A/c    Dr    $ 7,900

Bank A/c Cr    $ 7,900

( On payment to supplier)

On receipt of uniform against PO for Uniform:

Uniform A/c Dr $ 4,000

Supplier A/c    Cr    $ 4,000

(On receipt of balance supply of uniform against PO for $ 12,000)

Supplier A/c    Dr $ 4,000

Bank A/c Cr $ 4,000

(On payment to supplier for supply of uniform)