Accounting Scenarios & Facts

To be considered –available,” property taxes must have been collected either during the government’s fiscal year or within sixty days of year-end.

For its fiscal year ending September 30, 2007, Twin City levied $500 million in property taxes. It collected taxes applicable to fiscal 2007 as follows (in millions):

June 1, 2006, through September 30, 2006 – $ 20

October 1, 2006, through September 30, 2007 – $440

October 1, 2007, through November 30, 2007 – $15

December 2007 – $4

The city estimates that $10 million of the outstanding balance will be uncollectible. For the fiscal year ending September 30, 2007, how much should Twin City recognize in property tax revenue (in millions) in its general fund? $490

Assume the same facts as in the previous example. How much should Twin City recognize in property tax revenue (in millions) in its government-wide statement of activities? $490

Central City was awarded two state grants during its fiscal year ending September 30, 2007: a $2 million block grant that can be used to cover any operating expenses incurred during fiscal 2008, and a $1 million grant that can be used any time to acquire equipment for its police department. For the year ending September 30, 2007, Central City should recognize in grant revenue in its funds statements (in millions): $3

Assume the same facts as in the previous example. How much should the city recognize in grant revenue in its government-wide statements? $2

Assuming that a government will collect its sales taxes in sufficient time to satisfy the –available” criterion, it would ordinarily recognize revenue from sales taxes in its governmental fund statement on the date the merchant must remit the taxes to the government.

Assuming that a government will collect its sales taxes in sufficient time to satisfy the –available” criterion, it would ordinarily recognize revenue from sales taxes in its government-wide statements when the underlying sales transaction takes place.

Accounting Exercise

The recognition of revenue from fines does not necessarily reflect the amount –earned” by merely issuing tickets.

In August 2008, the last month of its fiscal year, Goldwaithe Township issued $88,000 worth of tickets for parking and traffic violations. Of these, the township collected $45,000. It expects to collect an additional $20,000 within sixty days of the close of the fiscal year and to collect $3,000 subsequent to that. It will have to write off the balance. The tickets are due; the protest period expires on September 15.

1. How much revenue should the township recognize from the tickets issued in August 2008?

Goldwaithe Township should recognize $65,000 in revenue from tickets issued in August. This accounts for the $45,000 collected nad the $20,000 expected to be collected within sixty days.

2. How might your answer change with respect to the township’s government-wide statements?

With respect to Goldwaithe Township’s government-wide statements, the township would recognize $68,000 is revenue from tickets issued.

For additional information about Arizona tax returns, contact the Phoenix CPA offices of Jacobsen & Wachterhauser, an Arizona accounting firm.

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