A City Uses the Allowance Method to Provide for Uncollectible

question 13

Short Answer

A city uses the allowance method to provide for uncollectible property taxes.At the start of the year,the city established an allowance of $100,000 for uncollectible taxes.During the year,it wrote off $80,000 as uncollectible.At year-end,the city still has some uncollected taxes,but believes it will need an allowance of only $15,000 to cover any receivables that it may need to write off as uncollectible.What adjusting entry should it make?

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Definitions:

Net Operating Losses

Financial losses that a company reports when its operating expenses exceed its revenues, which can be used for tax relief.

Tax Liability

The total amount of tax owed to the tax authorities by an individual, organization, or company at any given time.

Optimal Size

Optimal size is the most efficient scale of operation for a firm where it can minimize its cost and maximize its profitability.

Synergy

The concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts.