ExpertHard1 markMultiple Choice
CPA · Question 05 · Area III: State & Local Governments
Blue City's General Fund reported the following for the fiscal year:<br/>- Property taxes levied: $5,000,000<br/>- Collected during the year: $4,200,000<br/>- Collected within 60 days after year-end: $300,000<br/>- Collected between 61 and 90 days after year-end: $100,000<br/>- Estimated uncollectible: $50,000<br/><br/>Under the modified accrual basis of accounting, what amount of property tax revenue should be recognized?
Blue City's General Fund reported the following for the fiscal year:<br/>- Property taxes levied: $5,000,000<br/>- Collected during the year: $4,200,000<br/>- Collected within 60 days after year-end: $300,000<br/>- Collected between 61 and 90 days after year-end: $100,000<br/>- Estimated uncollectible: $50,000<br/><br/>Under the modified accrual basis of accounting, what amount of property tax revenue should be recognized?
Answer options:
A.
$4,200,000
B.
$4,500,000
C.
$4,600,000
D.
$4,950,000
How to approach this question
Apply the 'available' criterion for property taxes (imposed nonexchange revenues). Available usually means collected within the current period + 60 days.
Full Answer
B.$4,500,000✓ Correct
Under GASB standards (modified accrual), property tax revenue is recognized when levied, provided it is measurable and available. 'Available' is defined as collected within the current period or soon enough thereafter to pay liabilities of the current period (maximum 60 days for property taxes). Revenue = $4,200,000 (current) + $300,000 (60-day accrual) = $4,500,000.
Common mistakes
Including amounts collected after 60 days; recognizing the full levy minus bad debt (which is full accrual).
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