Chapter 3
Question 3-5
Explain the essential differences between revenues and other financing sources and between expenditures and other financing uses. How is each of these items reported on the governmental funds statement of revenues, expenditures, and changes in fund balances?
Question 3-8
Distinguish among appropriations, expenditures, encumbrances, and expenses.
Exercise 3-20
Recording Budget and Ending Fund Balances. (LO3-5) The following information is provided about the Town of York’s General Fund operating statement and budgetary accounts for the fiscal year ended September 30. (Note: The town has no restricted, committed, or assigned fund balances.)
A. Prepare the journal entry to record the budget.
B. Did the Town of York engage in imprudent budgeting practice by authorizing a greater amount of expenditures than revenues estimated for the year, or potentially violate town or state balanced-budget laws?
C. Calculate the end-of-year balance for the Fund Balance—Unassigned that would be reported on the town’s balance sheet prepared as of September 30. Show all necessary work.
Chapter 4
Question 4-4
Explain why some transactions for governmental activities at the government-wide level are reported differently than transactions for the General Fund. Give some examples of transactions that would be recorded in the general journals of (a) only the General Fund, (b) only governmental activities at the government-wide level, and (c) both.
Case 4-14
Research Case—Delinquent Taxes and Tax Liens. (LO4-1) When property taxes become delinquent, government entities often accrue interest and penalties on the delinquent taxes or choose to sell the rights to collect such taxes, interest, and penalties to external parties. Select a local municipality of your choice. Using information from the government’s website, respond to the questions below. (Hint: Search for delinquent tax collection process, delinquent property taxes—FAQs, tax lien, etc.)
A. What happens if a taxpayer fails to pay property taxes on time? When do taxes become delinquent? What happens if a taxpayer fails to pay delinquent taxes? At what point does a tax lien attach to the property? What interest charges and other penalties or fees are assessed to the delinquent taxpayer?
B. If delinquent property taxes or tax liens are sold at public auction, what rights are purchased by the buyer? Is there a possibility, at some point in time, that the tax lien buyers can attain legal title to the property for which they hold the tax lien? (This may be called a treasurer’s deed.) If so, describe this process.
Exercise 4-19
Accounting for Property Taxes. (LO4-1) On July 1, 2023, the beginning of its fiscal year, Ridgedale County recorded gross property tax levies of $4,200,000. The county estimated that 2 percent of the taxes levied would be uncollectible. As of April 30, 2024, the due date for all property taxes, the county had collected $3,900,000 in taxes. During the current fiscal year, the county collected $53,000 in delinquent taxes and $4,800 in interest and penalties on the delinquent taxes. The county imposed penalties and interest in the amount of $14,500 but only expects to collect $12,800 of that amount. At the end of the fiscal year (June 30, 2024), uncollected taxes, interest, and penalties are reclassified. They are not expected to be collected within the first 60 days for the following fiscal year.
A. Prepare journal entries to record the tax levy on July 1, 2023, in the General Fund. (Ignore all entries in the governmental activities journal.)
B. Prepare a summary journal entry to record the collection of current taxes as of April 30.
C. Prepare a summary journal entry to record the collection of delinquent taxes, interest, and penalties. (You may assume that these amounts had been designated as Deferred Inflows of Resources.)
D. Prepare the journal entry necessary to reclassify the uncollected tax amounts as delinquent. Assume these taxes are not expected to be collected within 60 days of year-end.
E. Prepare the journal entry necessary to record interest and penalties if they are not expected to be collected soon after year-end.
F. Suppose that a portion of the delinquent taxes included in part d is collected within 60 days of year-end. Would this information affect the accounting treatment of the taxes?
