E1

Prepare general journal entries to record the following transactions in Menfee

City’s General Ledger and make adjusting entries, if needed:
1. Menefee City levied property tax of $12,000,000 FOR 20X6. The taxes were
levied on January 1, 20x6. Menefee expects $80,000 to be uncollectible.
Three-fourths of the taxes receivable are expected to be collected within
the 2% discount period. Another $1,000,000 of taxes receivable should be
collected before year-end but after the discount period. The balance of
collectible taxes is expected to be collected at a uniform rate over the first
10 month of 20x7.
2. Menefee collected $9,100,000 (before discounts) of its taxes receivable
prior to the end of the discount period. The balance of the taxes receivables
are past due.
3. Menefee wrote off taxes receivables of $30,000 as uncollectible.
4. Menefee collected another $900,000 of its taxes receivables after the
discount period but before the year end.
Solution
Taxes Receivable—Current 12,000,000
Allowance for Uncollectible Current Taxes 80,000
Allowance for Discounts on Taxes 180,000
Revenues
10,204,000
Deferred Revenues
1,536,000
To record tax levy.
Computations:
Discounts—$12,000,000 x .75 x.98 = $180,000
Revenues:
Expected collections in discount period ($12,000,000 x .75 x.98) $8
Expected collections after discount period and before year end 1,0
Collections in first 60 days of 20X7:
($12,000,000 - 9,000,000- $1,000,000 -$80,000) x 2/10
384,000
Total property tax revenues
$10,204,000
2a. Cash ($9,100,000 x .98) 8,918,000
Allowance for Discounts on Taxes 180,000
Revenues 2,000
Taxes Receivable—Current 9,100,000
To record tax collections in the discount period.
Note that when actual discounts are more (or less) than the estimated amount this
difference results in decreasing (or increasing) revenues. This adjustment makes
revenues equal to the amount that would have been recorded initially had the
estimate proved correct.
2b. Taxes Receivable—Delinquent 2,900,000
Allowance for Uncollectible Current Taxes 80,000
Taxes Receivable—Current 2,900,000
Allowance for Uncollectible
Delinquent Taxes 80,000
To reclassify past due taxes as delinquent.
3. Allowance for Uncollectible Delinquent Taxes 30,000
Taxes Receivable—Delinquent 30,000
To record write-off of taxes as uncollectible.
4. Cash 900,000
Taxes Receivable—Delinquent 900,000
To record tax collections.
E2 The City of Asher had the following transactions, among others in 20x7:
1. The council estimated that revenues of £210,000 would be generated for
the General Fund in 20x7. The sources and amounts of expected revenues
are as follows:
Property taxes £150,000
Parking meters 5,000
Business Licenses 30,000
Amusement Licenses 10,000
Charges for services 8,000
Other Revenues 7,000
£210,000
2. Property taxes of £152,000 were levied by the council ; £2,000 of these
taxes are expected to be uncollectible.
3. The council adopted a budget revision increasing the estimate of
amusement licenses revenues by £2,000 and decreasing the estimate for
business licenses revenues by £2,000.
4. The following collections were made by the city:
Property taxes £140,000
Parking meters 5,500
Business licenses 28,000
Amusement licenses 9,500
Charges for services (not 9,000
previously accrued)
Other revenues 10,000
£202,000
5. The resources of a discontinued Capital Projects fund were transferred to
 the General Fund, £4,800.
6. Enterprise Fund cash of £5,000 was paid to the General fund to subsidise
its operations.
Required
a. Prepare general journal entries and budgetary entries to record the
transactions in the General Ledger and Revenues Subsidiary Ledger
accounts.
b. Prepare a trial balance for the Revenues Ledger after posting the general
journal entries prepared in item (a) show agreement with the control
accounts.
c. Prepare the general journal entries to close the revenue accounts in the
general ledger and Revenues ledger.
Solution
E2 (a)
City of Asher
General Fund
General Journal
General Ledger
# Accounts Dr. Cr.
1. Budgetary Entry
Estimated Revenues 210,000
Fund Balance 210,000
To record estimated revenues.
Revenues Ledger (Estimated Revenues):
Property Taxes 150,000
Parking Meters 5,000
Business Licenses 30,000
Amusement Licenses 10,000
Charges for Services 8,000
Other Revenues 7,000
210,000
2. Taxes Receivable—Current 152,000
Allowance for Uncollectible Current Taxes 2,000
Revenues 150,000
To record property tax levy.
Revenues Ledger (Revenues):
Property Taxes 150,000
3. Budgetary Entry
Estimated Revenues 2,000
 Estimated Revenues. 2,000
To record budget revisions.
Revenues Ledger (Estimated Revenues):
Amusement Licenses 2,000
Business Licenses 2,000
E2 (a) (continued)
4. Cash 202,000
Taxes Receivable—Current 140,000
Revenues 62,000
To record taxes and other revenues collected.
Revenues Ledger (Revenues):
Parking Meters 5,500
Business Licenses 28,000
Amusement Licenses 9,500
Charges for Services 9,000
Other Revenues 10,000
62,000
5. Cash 4,800
Transfer from Capital Projects Fund 4,800
To record transfer from Capital Projects Fund.
6. Cash 5,000
Transfer from Enterprise Fund 5,000
To record transfer from Enterprise Fund.
E2 (b)
Revenues Subsidiary Ledger (Not Required)
Balance
Accounts Dr. Cr. Dr. (Cr.)
Property Taxes 150,000 (1) 150,000(2) –
Parking Meters. 5,000 (1) 5,500(4) (500)
Business Licenses 30,000 (1)
(2,000)(3) 28,000(4) –
Amusement Licenses 10,000 (1) 9,500(4) 2,500
2,000 (3)
Charges for Services 8,000 (1) 9,000(4) (1,000)
Other Revenues 7,000 (1) 10,000(4) (3,000)
(2,000)
E2 (b) (continued)
City of Asher
General Fund
Trial Balance—Revenues Subsidiary Ledger
At 20X7 Year End
Dr. Cr.
Property Taxes – –
Parking Meters 500
Business Licenses – –
Amusement Licenses 2,500
Charges for Services 1,000
Other Revenues 3,000
2,500 4,500
(2,500)
2,000
Proof from General Ledger:
Revenues $212,000
Estimated Revenues 210,000
$ 2,000
E2 (c)
General Ledger
# Accounts Dr. Cr.
C1. General Ledger
Revenues 212,000
Fund Balance 2,000
Estimated Revenues 210,000
To close revenue-related accounts.
Revenues Ledger (Estimated Revenues):
Parking Meters 500
Amusement Licenses 2,500
Charges for Services 1,000
Other Revenues 3,000
       
4,500 2,500