Interest charges on the tax anticipation notes

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The controller of a school district had recorded the entireproperty tax levy, $20M, as revenues when levied during the firstmonth of the year. At year-end the auditor states that $3M must bereclassified as deferred (unearned) revenues because the propertylevy for that amount will not be collected before the end of thesecond month of the next accounting period. The controller objects,noting that the property tax receivables are as available as cashbecause the school district regularly uses them as the basis forborrowing on tax anticipation notes at local banks. Furthermore,the penalties and interest charged on delinquent taxes exceed the interest charges on the tax anticipation notes.

Who's right? Why?

Reference no: EM13257892

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