Exercise 7-3 (Algo)

Benton County includes an independent school district and two individually chartered towns within the County. Benton County’s Treasurer assesses and collects property taxes on behalf of itself, the school district, and the towns. The County uses a tax collection custodial fund to record tax collections for the school district and towns. During the year ended December 31, 2020, the following transactions took place:

1. The County levied taxes as follows:
- Benton County General Fund: $26,800,000
- School District: $14,300,000
- Towns: $4,300,000
- Total: $45,400,000

2. The property taxes levied in part (a) were collected.

3. The amounts collected were paid to the school district and towns.

Required:
a. Prepare journal entries for Benton County and the Benton County Independent School District—identify the funds.

Journal Entries for Benton County and Benton County Independent School District:Journal entries for Benton County: Accounts Debit Credit Property tax receivable control (for Benton County General Fund) $26,800,000

Property tax receivable control (for school district) $14,300,000 Property tax receivable control (for town) $4,300,000 Revenue control (for Benton County General Fund) $26,800,000 Revenue control (for school district) $14,300,000 Revenue control (for town) $4,300,000

To record property taxes levied for Benton County, School District, and Towns

Journal entries for Benton County Independent School District: Accounts Debit Credit Revenue control (for school district) $14,300,000 Other financing source - proceeds from tax levy $14,300,000To record collection of taxes from Benton County's tax collection custodial fund for school district

Let’s analyze the given transactions for Benton County. During the year ended December 31, 2020:1. Benton County General Fund levied property taxes of $26,800,000 while the School District levied property taxes of $14,300,000 and Towns levied property taxes of $4,300,000.

2. The property taxes were collected.

3. The amounts collected were paid to the school district and towns.

Journal entries have been made to record the transactions. It can be concluded that the property taxes collected are deposited into Benton County's tax collection custodial fund. The fund is then used to make payments to the School District and Towns.

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DiBotcher DiBotcher · Answer 2 · 2024-01-02T07:00:28-05:00

Final answer:

The question relates to governmental accounting and tax collection for Benton County, its School district and Towns. Journal entries are prepared to represent the levy, collection, and payment of property taxes. In this scenario, taxes levied and tax receivable are credited and debited respectively when tax is levied; Cash and Tax Receivable accounts are debited and credited respectively when taxes are collected; Amount due to School District and Towns and Cash accounts are debited and credited respectively when money is paid to the School District and Towns.

Explanation:

The question describes a scenario where Benton County collects property taxes not only for itself but also for the School District and Towns within its area. In response to this scenario, journal entries would be created to record the tax levies, collections, and payments made to the school district and towns. Here are the representative entries:

For Benton County

Dr Tax Receivable - $45,400,000
Cr Taxes Levied - $45,400,000
Dr Cash - $45,400,000
Cr Tax Receivable - $45,400,000
Dr Amount due to School District and Towns - $18,600,000
Cr Cash - $18,600,000

For Benton County Independent School District

Dr Cash - $14,300,000
Cr Tax Revenue - $14,300,000

Please note: Usually, in the case of governmental entities like Benton County, governmental accounting standards would apply, which might have slight variations depending on jurisdiction and specific rules of the jurisdiction.

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