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
13 views

Property Taxes Rosen Corporation was formed on December 12, 2018. It plans to close its books annually each December 31. Rosen is located in Lanmark City and Apple County. The fiscal period of these two governmental units runs from July 1 to June 30. The property tax that they assess on property held on January 1 of each year becomes a lien against the property on July 1. The estimated property taxes for Rosen for the period July 1, 2019, to June 30, 2020, are $15,300. The tax bill is mailed in October with a requirement that the tax be paid before December 31. The tax bill received on October 30, 2019, for Rosen revealed an actual tax of $15,705, and the corporation paid this amount on November 30, 2019. Rosen elects to record monthly property tax adjustments for interim statements required by management.

Required:

  1. 1. Prepare all property-tax-related entries for Rosen for the period July 1, 2019, to June 30, 2020.
  2. 2. Show how the preceding information would be reported on Rosen’s December 31, 2019, balance sheet.

1.

To determine

Prepare journal entry to record the given transaction.

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 given transaction.

DateAccount Titles and explanationDebit ($)Credit ($)
July 1, 2019No entry   
      No entry   
 (To record property tax that are assess on the property tax becoming a lien against the property no entry is required.)  

Table (1)

DateAccount Titles and explanationDebit ($)Credit ($)
Property tax expense [$15,30012]1,275 
      Property taxes payable  1,275
 (To record the amount of tax payable that are to be paid for three months from July 31 through September 30, 2019)   

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 $1,275.
  • Property tax payable is a liability and there is an increase in the value of liability. Hence, credit the property tax payable by $1,275.
DateAccount Titles and explanationDebit ($)Credit ($)
October 30,2019Property tax expense (1)1,320 
      Property taxes payable  1,320
 (To record the amount of tax payable that are to be paid for October 30)   

Table (3)

  • 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 $1,320.
  • Property tax payable is a liability and there is an increase in the value of liability. Hence, credit the property tax payable by $1,320.
DateAccount Titles and explanationDebit ($)Credit ($)
November 30, 2019Property tax payable (2) 5,145 
 Prepaid property taxes10,560 
      Cash  15,705
 (To record the payment made on property tax)  

Table (4)

  • Property tax payable is a liability and there is a decrease in the value of liability

2.

To determine

State the manner by which the given transaction will show its effects on the balance sheet for the year ended December 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

MANAGING CURRENT ASSETS Dan Barnes, financial manager of Ski Equipment Inc. (SKI), is excited, but apprehensive...

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