BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
147 views

Property Taxes Ames Company is located in a city and county that issue property tax statements in May of each year. The fiscal year for the two local governmental units is May 1 to April 30. Property taxes of $48,000 are assessed against Ames property held on January 1, 2019. The taxes become a lien against Ames property on May 1, 2019. The actual amount of the property taxes of $48,000 is determinable on May 1, 2019; therefore, no estimate of taxes is required. The tax bills are payable in two equal installments on July 10 and September 10.

Required:

Assuming that monthly accruals are recorded, prepare all property tax journal entries for the period May 1 to September 30, 2019.

To determine

Prepare journal entry to record the given transaction by assuming that monthly accruals are recorded.

Explanation

Liabilities:

The claims creditors have over assets or resources of a company are referred to as liabilities. These are the debt obligations owed by company to creditors. Liabilities are classified on the balance sheet as current liabilities and long-term liabilities.

Prepare journal entry to record the two month entries May 31 and June 30, 2019.

DateAccount Titles and explanationDebit ($)Credit ($)
Property tax expense [$48,00012] 4,000 
      Property taxes payable  4,000
 (To record the amount of tax payable that are to be paid for  two  months)   

Table (1)

  • Property tax expense is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the property tax expense by $4,000.
  • Property tax payable is a liability and there is an increase in the value of liability. Hence, credit the property tax payable by $4,000.

Prepare journal entry to record the payment of tax payable on installment.

DateAccount Titles and explanationDebit ($)Credit ($)
July  10, 2019Property tax expense 8,000 
 Prepaid property taxes16,000 
      Cash [$48,0002] 24,000
 (To record the payment made on tax payable in instalment )  

Table (2)

  • Property tax expense is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the property tax expense by $8,000.
  • Prepaid property tax is an asset there is an increase in the value of an asset. Hence, debit the prepaid property tax by $16,000.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $24,000.

Prepare journal entry to record the two month entries July 31 and August 31, 2019

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is an access control list?

Accounting Information Systems

What does human capital include?

Accounting Information Systems

What are some differences in the analysis for a replacement project versus that for a new expansion project?

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

CURRENT YIELD, CAPITAL GAINS YIELD, AND YIELD TO MATURITY Hooper Printing Inc. has bonds outstanding with 9 yea...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Explain how absolute advantage and comparative advantage differ.

Principles of Macroeconomics (MindTap Course List)

What is the price-recovery component?

Cornerstones of Cost Management (Cornerstones Series)