Obj. 2 The wages payable and wages expense accounts at May 31, after adjusting e
ID: 2331359 • Letter: O
Question
Obj. 2 The wages payable and wages expense accounts at May 31, after adjusting entries have been posted at the end of the first month of operations, are shown in the following T accounts:
Determine the amount of wages paid during the month.
Obj. 2, 3 A-Z Construction Company was organized on May 1 of the current year. On May 2, A-Z Construction prepaid $18,480 to the city for taxes (license fees) for the next 12 months and debited the prepaid taxes account. A-Z Construction is also required to pay in January an annual tax (on property) for the previous calendar year. The estimated amount of the property tax for the current year (May 1 to December 31) is $45,000.
Journalize the two adjusting entries required to bring the accounts affected by the two taxes up to date as of December 31, the end of the current year.
What is the amount of tax expense for the current year?
Explanation / Answer
Wages paid during the month=Wages expense balance-Wages payable balance=73250-7175=$ 66075 Adjusting entries: Date Account titles and explanation Debit Credit Dec 31. Tax expense (18480*8/12) 12320 Prepaid taxes (Note:1) 12320 (Tax expense for License fee) Dec 31. Tax expense 45000 Property tax payable 45000 (Property tax due) Tax expense for current year=$12320+45000=$ 57320 Note:1-License fee is paid for 12 months starting from May 1. May 1 to Dec 31 (8 months) license fee should be treated as current year tax expense.
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