On July 1,the first day of its fiscal year,the Town of Eldon levied a $1,000,000 property tax which is payable in full on December 1 of the same year.On September 15,the town decided to borrow $200,000 in 90-day tax anticipation notes to cover operating expenditures until the tax revenues are collected.The journal entry on September 15 to record the issuance of tax anticipation notes will include

Question

Quizplus · Accepted Answer

The journal entry on September 15 to record the issuance of tax anticipation notes will include a credit to Tax Anticipation Notes Payable. This is because the town is borrowing money and incurring a liability until the tax revenue is received. Choice B is incorrect as tax anticipation revenue is recognized when the actual tax revenue is received, not when the notes are issued. Choice A is incorrect as it reflects the source of financing for the notes, but does not reflect the liability incurred. Lastly, choice D is incorrect as it suggests that there are separate journal entries for the General Fund and governmental activities, whereas there would only be one journal entry for the town as a whole.

On July 1,the First Day of Its Fiscal Year,the Town