Question

The New York city that has a 12/31 fiscal year end has adopted a policy of recognizing property tax revenue consistent with the 60-day rule allowable period under GAAP. Property taxes of $600,000 (of which none are estimated to be uncollectible) are levied in October 2016 to finance the activities of fiscal year 2017. Property taxes are due in two installments June 20 and December 20. Cash collections related to property taxes are as follows:

                2/15/17    for property taxes levied in 2015, due in 2016                            $ 25,000

                3/15/17    for property taxes levied in 2015, due in 2016                            $ 15,000

                4/15/17    for property taxes levied in 2015, due in 2016                            $ 10,000

                6/20/17    First installment of taxes levied in 2016, due 6/20/17                $350,000

                12/20/17   Second installment of taxes levied in 2016, due 12/20/17       $150,000

                1/15/18    for property taxes levied in 2016, due in 2017                            $ 15,000

                3/15/18    for property taxes levied in 2016, due in 2017                            $ 10,000

                4/15/18    for property taxes levied in 2016, due in 2017                            $    5,000

. The total amount of property tax revenue that should be recognized in the governmental fund financial statements in 2017 is:

         

		$600,000
		$575,000
		$540,000
		$535,000

Answer 1

Let's understand the 60 Days Rule First applicable under GAAP. As per GAAP (generally accepted accounting principles), revenue for any period which is collected even after 60 days from the end of the year would still be counted for same year. For e.g. 2016 revenue can be counted upto 60 days from beginning for 2017, i.e. 31 days in Jan+28 days in Feb+1 day in March. Hence, revenue collected upto 1st March 2017 would still be counted as 2016 revenue.

Similarly, revenue collected upto 1st March 2018 would still be counted as 2017 revenue.

Any residual revenue collected after 1st March 2018 would then be counted as 2018 revenue.

Based on above principle, let's apply the same on our payment schedule.

Property Tax Calculation under 60 Days Allowance Rule

Date of Payment	Particulars	Amount	2016 Revenue	2017 Revenue	2018 Revenue	Remarks
	Date upto which revenue considered under 60 Day Rule		01-03-17	01-03-18	01-03-19
2/15/2017	for property taxes levied in 2015, due in 2016	25,000	25,000			Considered as 2016 revenue since still within 60 days from end of 2016
3/15/2017	for property taxes levied in 2015, due in 2016	15,000		15,000
4/15/2017	for property taxes levied in 2015, due in 2016	10,000		10,000
6/20/2017	First installment of taxes levied in 2016, due 6/20/17	350,000		350,000
12/20/2017	Second installment of taxes levied in 2016, due 12/20/17	150,000		150,000
1/15/2018	for property taxes levied in 2016, due in 2017	15,000		15,000
3/15/2018	for property taxes levied in 2016, due in 2017	10,000			10,000	Considered as 2018 revenue since it falls outside 60 days from end of 2017
4/15/2018	for property taxes levied in 2016, due in 2017	5,000			5,000	Considered as 2018 revenue since it falls outside 60 days from end of 2017
	Total	580,000	25,000	540,000	15,000

Hence, based on above summary, total revenue for 2017 would be 540,000 $.