Question

Question 1

The Town of Elderville accounts for its revenues and day-to-day operating expenditures in its General Fund. The Town uses encumbrance accounting to keep budgetary control over the appropriation for "other expenditures." Prepare journal entries to record these transactions in the General Fund for the calendar year 2019.

1. A long-time employee of the Town of Elderville retires. Per Town policy, the employee is paid $9,800 for accumulated vacation pay.
2. To raise the required $315,000 in property taxes, property owners are billed for a total of $317,000. This will allow $2,000 for estimated uncollectible property taxes and refunds.
3. To provide cash at the start of the year, the Town borrows $100,000 from the Electric Utility Enterprise Fund. The borrowing will be repaid in six months.
4. The Town sends a purchase order for $4,000 to a vendor for supplies.
5. The General Fund pays $85,000 to the Debt Service Fund (DSF) to enable the DSF to pay interest and principal on Town debt.
6. The vendor in 4., above, delivers the supplies ordered by the Town, and bills the Town for $4,200. The Town accepts delivery and prepares a voucher for the full amount of the bill. The Town uses the purchases method to account for supplies inventory.
7. Property owners pay property taxes in the amount of $300,000.
8. The Town repays the $100,000 borrowed in 3., above.
9. The voucher in 6., above, is paid.
10. The Town receives $80,000 for sales taxes collected by the state on behalf of the Town.
11. Sparrow, a long-time resident, is unable to pay his $3,000 property tax bill in full. He pays $1,000, and the Town writes off the remaining $2,000 as uncollectible.
12. The Town declares all remaining unpaid property taxes to be delinquent. It also notifies delinquent property owners that they owe penalties of $2,000 on the delinquent taxes.
13. The General Fund receives a bill from the Water Utility Fund for $6,000.
14. The Town pays personal services in the amount of $253,000.
15. The Town is notified by the state that it collected an additional $3,000 in December 2019 sales taxes that it will remit to the Town on January 20, 2020. The Town considers sales taxes collected within 60 days of its fiscal year-end available.
16. The Town files a tax lien against one of the delinquent taxpayers (in 12. above). The taxpayer is past due on $4,000 of property taxes and owes penalties and interest of $400 on delinquent taxes.
17. The city sold the property (in 16.) at auction for $6,000. The auctioneer charged $300 for his services, which has not yet been paid.

Question 2

Theodore County uses a General Fund, a Special Revenue Fund, and an Enterprise Fund. The Special Revenue Fund is financed by a grant from the state to provide care for the elderly. The Enterprise Fund provides bus service both to the public and to government agencies. Prepare journal entries to record these transactions in the applicable funds. Indentify the funds involved in each case.

1. The Enterprise Fund bills the Special Revenue Fund $15,000 for bus service provided to the elderly.
2. The General Fund receives an electricity bill for $20,000 and prepares a voucher to pay the bill. The General Fund then bills the Special Revenue Fund for $3,000, representing the portion of the electricity bill applicable to the senior citizens building.
3. The Enterprise Fund is short of cash to pay its bills. The General Fund lends the Enterprise Fund $50,000 in cash, which will be repaid before the end of the year.
4. The General Fund pays cash of $100,000 to the Enterprise Fund as a subsidy to help meet the operating costs of the Enterprise Fund.

Question 3

In its General Fund balance sheet at December 31, 2019, Marathon City reported Property taxes receivable of $40,000, deferred property tax revenues of $15,000, and an allowance for uncollectible taxes of $0. At the start of the year 2020, Marathon City made the following journal entry to record its property tax levy:

Property taxes receivable                                                                  950,000

Allowance for refunds and uncollectible taxes                                              10,000
Revenues - property taxes                                                                            940,000

During the year 2020, the city collected all the property taxes receivable outstanding at December 31, 2019. It also collected $920,000 of the receivables recognized at the beginning of 2020 and wrote off $6,000 of receivables against the allowance account. On December 31, 2020, the Marathon City finance director made the following determinations regarding the property taxes outstanding at that date:

1. All outstanding property taxes would be collected, so there was no need for the allowance for uncollectible property taxes.
2. The City would collect about $15,000 of the outstanding property taxes receivable during the first 60 days of 2021 and the remainder during the latter part of 2021.

Required: Calculate how much property tax revenues Marathon City should recognize in 2020.

Answer 1