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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
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 $48,000 is determinable on May 1, 2019; therefore, no estimate of taxes is required. The tax bills are payable in two equal installments on July 10 and September 10.
Required:
Assuming that monthly accruals are recorded, prepare all property tax journal entries for the period May 1 to September 30, 2019.
Prepare journal entry to record the given transaction by assuming that monthly accruals are recorded.
Liabilities:
The claims creditors have over assets or resources of a company are referred to as liabilities. These are the debt obligations owed by company to creditors. Liabilities are classified on the balance sheet as current liabilities and long-term liabilities.
Prepare journal entry to record the two month entries May 31 and June 30, 2019.
| Date | Account Titles and explanation | Debit ($) | Credit ($) |
| Property tax expense | 4,000 | Â | |
| Â | Â Â Â Â Property taxes payable | Â | 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 $4,000.
Prepare journal entry to record the payment of tax payable on installment.
| Date | Account Titles and explanation | Debit ($) | Credit ($) |
| July 10, 2019 | Property tax expense | 8,000 |  |
| Â | Prepaid property taxes | 16,000 | Â |
| Â | Â Â Â Â Cash | Â | 24,000 |
| Â | (To record the payment made on tax payable in instalment ) | Â | Â |
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
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