Reference no: EM131701632

Question: (Accounting for property taxes) The General Fund of the City of Snake River operates on a calendar year basis. It sends bills to property owners on January 2. Taxes are due March 1, but taxpayers are allowed until March 31 to make payment without penalty. Taxpayers who pay before March 1 are allowed to deduct a 1 percent discount. Taxpayers who fail to pay by April 1 are declared delinquent, and notice is sent to them that they owe a penalty of 4 percent of the unpaid taxes. Prepare journal entries to record the following Snake River transactions:

1. Levies property taxes in the amount of $1,000,000. Past experience shows that about $6,000 of that amount will not be collected because taxpayers take advantage of the 1 percent discount.

2. Collects cash of $693,000 before March 1 from taxpayers who had been billed $700,000, but who deducted the 1 percent early payment discount.

3. Collects cash of $275,000 from taxpayers in the month of March.

4. Declares all unpaid taxes to be delinquent and sends notices to delinquent taxpayers that they owe a 4 percent penalty. Snake River's accounting policy calls for accruing the penalty at the time taxes are declared delinquent.