Which of the following general journal entries would correctly record the property tax levy?

• A. Debit Taxes Receivable—Current 6,000,000; Credit Revenues 5,640,000; Debit Estimated Uncollectible Current Taxes 360,000.
• B. Debit Taxes Receivable—Current 6,000,000; Debit Estimated Uncollectible Current Taxes 360,000; Credit Revenues 5,640,000.
• C. Debit Taxes Receivable—Current 5,640,000; Debit Estimated Uncollectible Current Taxes 360,000; Credit Revenues 6,000,000.
• D. Debit Taxes Receivable—Current 6,000,000; Credit Revenues 5,640,000; Debit Estimated Uncollectible Current Taxes 360,000.

Answer: (B)

The main idea being tested is how to record a property tax levy so that the receivable reflects the full levy while revenue is recognized net of estimated uncollectibles.

Correct entry approach: record the full levy as a current taxes receivable and also recognize the expected loss from uncollectibles, with revenue shown net of that estimate. Debiting Taxes Receivable—Current for the full levy amount (6,000,000) reflects the gross amount the government expects to collect. Debiting Estimated Uncollectible Current Taxes (the expected loss) then shifts part of that amount out of revenue, and credit Revenues for the net collectible amount (5,640,000). This results in recognizing 5,640,000 of revenue while presenting a 6,000,000 receivable, with 360,000 identified as uncollectible.

The other options either misstate how the receivable and revenue should be balanced or fail to net the revenue correctly against the estimated uncollectibles, leading to an improper representation of the levy’s net collectible amount.