Statistics

Property Tax Calculations and Journal Entries. The Village of Darby’s budget calls for property tax revenues for the fiscal year ending December 31, 2011, of $2,660,000. Village records indicate that, on average. 2 percent of taxes levied are not collected. The county tax assessor has assessed the value of taxable property located in the village at $135,714,300.

Required

a. Calculate to the nearest penny what tax rate per $100 of assessed valuation is required to generate a tax levy that will produce the required amount of revenue for the year.

b. Record the tax levy for 2011 in the General Fund. (Ignore subsidiary detail and entries at the government-wide level.)

c. By December 31, 2011, $2,540,000 of the current property tax levy had been collected. Record the amounts collected and reclassify the uncollected amount as delinquent. Interest and penalties of 6 percent were immediately due on the delinquent taxes, but the finance director estimates that 10 percent will not be collectible. Record the interest and penalties receivable. (Round all amounts to the nearest dollar.)

SOLUTION

a. Revenues = levy – (.02 X levy) = .98 X levy = $2,660,000

Levy = $2,660,000 ÷ .98 = $2,714,286 (rounded to nearest dollar)

Rate X (assessed valuation ÷ 100) = levy

Rate = levy ÷ (assessed valuation ÷ 100)

Rate = $2,714,286 ÷ 1,357,143 = $2.00 per $100 of assessed valuation

Debits Credits

b. TAXES RECEIVABLE—CURRENT 2,714,286

ESTIMATED UNCOLLECTIBLE CURRENT TAXES 54,286

REVENUES 2,660,000

c. CASH 2,540,000

TAXES RECEIVABLE—CURRENT 2,540,000

TAXES RECEIVABLE—DELINQUENT 174,286

TAXES RECEIVABLE—CURRENT 174,286

ESTIMATED UNCOLLECTIBLE CURRENT TAXES 54,286

ESTIMATED UNCOLLECTIBLE DELINQUENT

TAXES 54,286

INTEREST AND PENALTIES RECEIVABLE 10,457

ESTIMATED UNCOLLECTIBLE INTEREST

AND PENALTIES...