Question

The City of Troy collects its annual property taxes late in its fiscal year. Consequently, each year it must finance part of its operating budget using tax anticipation notes. The notes are repaid upon collection of property taxes. On April 1, the city estimated that it will require $2,500,000 to finance governmental activities for the remainder of the fiscal year. On that date, it had $770,000 of cash on hand and $830,000 of current liabilities. Collections for the remainder of the year from revenues other than current property taxes and from delinquent property taxes, including interest and penalties, were estimated at $1,100,000. Required a. Calculate the estimated amount of tax anticipation financing that will be required for the remainder of the current fiscal year. b. Assume that on April 2, the City of Troy borrowed the amount calculated in part a by signing tax anticipation notes bearing 6 percent per annum to a local bank. Record the issuance of the tax anticipation notes in the general journals of the General Fund and governmental activities at the government-wide level. c By October 1, the city had collected a sufficient amount of current property taxes to repay the tax anticipation notes with interest. Prepare the general journals of the General Fund and governmental activities at the government-wide level.

Answer 1

Answers a) calculate the estimated amount of laa awicipated financing- eily of Troy calculation of Estimated Required Tax Anticipation financing for the year 2017. particulars A mount Amount Estimated expendikure requirement: Budgeted expenditures 2,509000 current liabilities payable $ 800,000 $3,330,000 LessiEstimated resources available: cash in hand $770,000 edlection of budgeted revencie aud delinquent property taxes $1,100,000 $1,810,000) Estimated amount of required tax auticipation note financing $1460,000 : The estimated amount of taxe anticipation ude financing for the fiscal year is $ 1,460,000. b) Journal entry Governmental activities and General fundit Date particulars F Debit Credit Cash Ale or $1,460,000 TO Tax anticipation notes |$1460,000 O payable being the issuance of tax anticipation e) Journal entry. General fund: Tax anticipalion notes payable 46 of $1,460,000 Expenditures Ale 43,800 1460,000x6% the To cash |$1503,800 Governmental activilies. Tax anticipaliou notes payable 46 om 141460.000 General government expenses af or 43,800 To cash |$1,503,800 Being the payment of tax and interesit Lotes]