(Accounting for property taxes) At the start of calendar year 2012, Central City’s records showed the following accounts relative to prior year property taxes:
Prepare journal entries to record the following transactions:
1. To balance its 2012 budget, which requires $1,500,000 in property taxes, Central City levies property taxes in the amount of $1,515,000, providing an allowance of $15,000 for uncollectible accounts.
2. During the year 2012, it collects property taxes as follows:
From prior year delinquent taxes 44,000
From 2012 tax levy 1,490,000
3. Central City recognizes the $15,000 deferred property tax revenues as revenues for 2012.
4. It initiates foreclosure proceedings against the delinquent taxpayer who owed the city $8,000. When it does this, it charges the taxpayer a penalty of $1,000.
5. An auctioneer sells the foreclosed property for $40,000, deducts a fee of $3,000, and remits $37,000 to the city. The city deposits the check and prepares a voucher for the net amount due to the taxpayer. 6. The city reverses the Allowance for uncollectible taxes—delinquent ($8,000) because the lien has been satisfied and all prior year delinquent taxes have been collected.
7. Central City rebates $12,000 to taxpayers who had paid their 2012 taxes, but who successfully appealed their tax assessments.
8. At year-end, the city
(a) declares all unpaid 2012 taxes as delinquent;
(b) concludes that there is no need for an allowance for uncollectible accounts; and
(c) estimates that $15,000 of the delinquent taxes will be collected in the first 60 days of calendar year 2013.