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Adjusting entries for prepaid and accrued taxes?

Asked by: livingeditor 1432 views YA Discussion

Andular Financial Services was organized on April 1 of the current year. On April 2, Andular prepaid $ 9,000 to the city for taxes (license fees) for the next 12 months and debited the prepaid taxes account. Andular is also required to pay in January an annual tax (on property) for the previous calendar year. The estimate amount of the property tax for the current year (April 1 to December. 31) is $ 34,500. (a) Journalize the two adjusting entries required to bring the accounts affected by the two taxes up to date as of December. 31, the end of the current year. (b) what is the amount of tax expense for the current year?

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  • Andular Financial Services was organized on April 1 of the current year On April 2 Andular prepaid $9 000 to the city for taxes (license fees) for the next 12 months and debited the prepaid taxes account Andular is also required to pay in January an annua

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  1. JKRB on Jun 08, 2012 Reply

    9,000 / 12 = $ 750 accrued monthly license fees.
    750 x 9 months = $ 6,750 total accrued license fees
    Dr Taxes (License Fees) Expense 6,750
    Cr Prepaid Taxes 6,750

    34,500 / 12 = $ 2,875 accrued monthly property taxes
    2,875 x 9 months = $ 25,875 total accrued property taxes
    Dr Property Tax Expense 25,875
    Dr Property Tax Payable 25,875

    6,750 + 25,875 = $ 32,625 tax expense for the year

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