The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks. The citizens agreed to a special assessment on their property for 20 years in an amount sufficient to pay principal and interest on the bonds. The city will oversee the construction of the sidewalks and act as agent for servicing the debt. If the special assessment is not sufficient to make the principal and interest payments, the city will assume the obligations.
-When the City of Arlington levies the special assessment tax, the best entry would be
A) Debit Special assessments receivable; Credit Revenues.
B) Debit Special assessments receivable; Credit Deferred inflow of resources.
C) Debit Special assessments receivable; Credit Liability.
D) Debit Special assessments receivable; Credit Fund balance.

Question

The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks.  The citizens agreed to a special assessment on their property for 20 years in an amount sufficient to pay principal and interest on the bonds.  The city will oversee the construction of the sidewalks and act as agent for servicing the debt.  If the special assessment is not sufficient to make the principal and interest payments, the city will assume the obligations.  
-When the City of Arlington levies the special assessment tax, the best entry would be
A) Debit Special assessments receivable; Credit Revenues.
B) Debit Special assessments receivable; Credit Deferred inflow of resources.
C) Debit Special assessments receivable; Credit Liability.
D) Debit Special assessments receivable; Credit Fund balance.

Quizplus · Accepted Answer

When the City of Arlington levies a special assessment tax, the correct accounting entry is to debit Special Assessments Receivable and credit Deferred Inflow of Resources. This entry reflects that the city has a receivable indicating an amount to be collected, but it cannot recognize the revenue until certain criteria are met, hence the use of Deferred Inflow of Resources.

The Citizens of a Specific Area of the City of Arlington