29 Jun Case 1: Discounts awarded for on time paymen
Question
Case 1: Discounts awarded for on time paymen
Case 1: Discounts awarded for on time payments
1) On January 1 a city levies property taxes for the year of $6,500,000, $65,000 of the property taxes are expected to be uncollectible. Also property owners who pay on or before the due date receive a discount of one-eleventh of their tax bill. It is expected that 70 percent of the taxes will be collected by the due date.
2) Taxes receivable of $5,500,000 are collected by the city on or before the on or before the due date. The balance of taxes is declared delinquent.
3) The city writes off $65,000 of the delinquent taxes as uncollectible.
4) The remainder of the taxes is collected by year end.
Case 2: Interest and penalties on late payments
1) On January 1 a county levies property taxes for the year of $4,000,000, $40,000 of the property taxes are expected to be uncollectible.
2) Before the due date the county collects $3,000,000 of taxes. Interest and penalties of 10 percent are assessed on the uncollectible taxes on the due date; 5 percent of the interest and penalties are expected to be uncollectible.
3) The county writes off $40,000 of the delinquent taxes and $4,000 of interest and penalties receivables as uncollectible.
4) The remainder of the receivables is collected by year end.
a) Prepare a journal entries to record the transactions for each preceding case.
b) Compute the amount of revenues to be reported for the year for each case.
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