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I was doing government accounting questions.
I¡¦m confused about the timing and the amount of property tax revenue recognition.
For example:
Becker CPA-00973
The following information pertains to
property taxes levied by Oak City for the calendar year 1992:
Collections during 1992$500,000
Expected collections during the first 60
days of 1993100,000
Expected collections during the balance of
199360,000
Expected collections during January
199430,000
Estimated to be uncollectible10,000
Total levy$700,000
What amount should Oak report for 1992 net
property tax revenues in its fund financial statements?
a.$700,000
b.$690,000
c.$600,000
d.$500,000
Choice "c" is correct. The net
property tax revenues would include the $500,000 collections during the year
plus the $100,000 expected collections within 60 days of year-end, for a total
of $600,000. The remaining expected collections of $90,000 ($60,000 + $30,000)
would be recorded as deferred revenue under the modified accrual basis of
governmental accounting for revenues. The $10,000 estimated to be uncollectible
would not be considered since revenues are accounted for net of the estimated
uncollectible amount.
But the explanation of Becker CPA-00959, it
said ¡§In the case of property taxes, revenues are recognized in the period in
which the taxes are levied.¡¨ According to this sentence, I would think that the
answer should include the collection in 1993 and 1994 rather than recognize tax revenue in 1993 and 1994. I am very confused now.
Could someone please tell me when to recognize property tax revenue and how
much should be recognized.
Joined: 27 Jun 2010
Online Status: Offline Posts: 337
Posted: 04 Jul 2010 at 06:33 | IP Logged
When the question asks for property tax revenue for fund statements, on the top of requirement in the period of levy, we should apply modified accrual accounting - recognize revenue when also available.
For property tax, available means collected in advance, the year of levy, and 60 days after the year-end of levy. For the question above, 1992 + 60 days in 1993. Those collected in advance would be deferred revenues until the period of levy starts.
90,000 remaining will be deferred revenues as we need to recognized Receivable in the time when money collected or legal claim arises ( usually period of levy).
For government-wide statements, revenues are recognized fully in the period of levy ( amount of levy less uncollectible amounts)
Hope it helps.
__________________ FAR - 07/09/10 - {95}
AUD - 10/02/10 - {96}
BEC - 11/29/10 - {92}
REG - 05/23/11 - {75 would be enough}90 unbelievable, and I AM DONE!!!
______________
Wiley book/Gleim CD/Gleim simulations
Joined: 28 Mar 2010
Online Status: Offline Posts: 83
Posted: 04 Jul 2010 at 09:56 | IP Logged
General rule of thumb:
Fund financial statements = cash collected in the period + first 60 days of next period. Also keep in mind that cash collected in the first 60 days of the current period is often revenue from a previous period. They can try to trick you that way (although not in this question).
Government-wide financial statements = regular accrual accounting, so all 1992 revenue regardless of when collected.
Joined: 27 Sep 2010 Location: United States
Online Status: Offline Posts: 10
Posted: 27 Oct 2010 at 22:47 | IP Logged
in this question, if they know "estimated to be uncollectable" of $10,000 in not collectable, why is it not netted against the collected? which is $600,000-10,000...
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Topic: When to recognize property tax revenue?
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