Question

Chapter 8 Recording Transactions Affecting a Fiduciary Fund—a Tax Custodial Fund

[Para. 8-b-2] Delinquent taxes and related interest and penalties were collected during the year for the taxing authorities shown below:

Governments/Funds:	Delinquent Taxes	Interest and Penalties	Total
City of Smithville General Fund	$ 387,201	$ 34,270	$ 421,471
Smithville CSD	722,650	57,810	780,460
Smith County	459,980	41,400	501,380
Smith County FPD	162,560	13,050	175,610
Total collected	$1,732,391	$146,530	$1,878,921

Required: Record the collections of delinquent taxes and interest and penalties by recognizing specific liabilities to each fund or government. The 1 percent collection fee should be deducted from the amounts due to other governments; the total amount deducted from other governments should be added to the amount due to the City of Smithville General Fund. (Note: Round all amounts to the nearest whole dollar. Rounding will result in $1 too much, to rectify make the adjustment to the correct total amount to City of Smithville General Fund amount.) Make these entries only in the Tax Custodial Fund general journal. The Tax Custodial Fund records the total amount of delinquent taxes and related interest and penalties in the Taxes Receivable for Other Funds and Governments—Delinquent account. (Note: All cash receipts and collection fees were recorded in earlier chapters in the journals for the General Fund and governmental activities at the government-wide level. The collection fees, though not separately identified, were included in Revenues—Charges for Services in the General Fund and in Program Revenues—General Government—Charges for Services in governmental activities.)

[Para. 8-b-3] All cash collected in paragraph 8-b-2 was transferred to the other funds and governments in the amounts calculated, adjusted for collection fees deducted or added (see Para. 8-b-2).

[Para. 8-b-4] Current taxes were collected during the year for the funds and governments shown below:

Funds/Governments:	Current Taxes Collected
City of Smithville General Fund	$ 1,488,206
Smithville CSD	8,412,730
Smith County	2,069,800
Smith County FPD	1,747,540
Total collected	$13,718,276

Required: Record the collections of current taxes and recognize specific liabilities to each fund or government, after deducting the 1 percent collection fee from other governments and adding the total collection fee to the amount due the City of Smithville General Fund. Make these entries only in the Tax Custodial Fund general journal.

[Para. 8-b-5] All cash collected in paragraph 8-b-4 was transferred to the other funds and governments, adjusted for collection fees deducted or added. (Note: For simplicity, Chapter 4 of Smithville did not address this collection of fees by the custodial fund.

[Para. 8-b-6] Make a year-end aggregate journal entry to reflect the additions and deductions made to net position for the reporting period.

Required: Using debits, record deductions for the amount of the administrative fee, and all funds transferred to other governments and funds in paragraphs 8-b-2 and 8-b-4. Additions should be credited for all property tax collections made for other governments. Recall that amounts related to the City of Smithville General Fund are not included in the journal entry because the city does not hold a net position in the fiduciary fund since it is administering the fund

[Para. 8-b-7] Make the year-end journal entry to reclassify all uncollected current taxes as delinquent. Add to the receivable amount interest and penalties of 6 percent on the reclassified amount (round amount to nearest whole dollar). The interest and penalties portion of the total amount should be debited to Taxes Receivable for Other Funds and Governments—Delinquent and credited to Due to Other Funds and Governments. You need only record the aggregate amounts reclassified in the general journal; the tax administrator will update the detailed tax ledger records for these reclassifications.

Post the journal entries for all the preceding transactions. Prepare closing entries to close the additions and deductions accounts.

Answer 1

Particulars	Debit	Credit
Taxes Receivable for Other Funds and   Governments—Delinquent (including   related interest and penalties)	$1,878,921
City of Smithville General Fund		$387,201
Smithville CSD		722,650
Smith County		459,980
Smith County FPD		162,560
Interest and Penalties		$146,530

Particulars	Debit	Credit
Taxes Receivable for Other Funds and   Governments—Delinquent (including   related interest and penalties)		$1,878,921
Bank Accounts	$1,878,921