A-Z Construction Company was organized on May 1 of the current year. On May 2, A

Question

A-Z Construction Company was organized on May 1 of the current year. On May 2, A-z Construction prepaid $4,920 to the city for taxes (lcense 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 s calendar year. The estimated amount of the property tax for the current year (May 1 to December 31) 1s $18,510 a. Journalize the two adjusting entries required to bring the accounts affected by the two taxes up to date as of Decamber 31, the end of the current year ucense fees Property tax b. What is the amount of tax expense for the current year?

Explanation / Answer

Solution a:

Solution b:

Amount of tax expense for the current year = $3,280 + $18,510 = $21,790

Journal Entries - AZ Construction Company Date Particulars Debit Credit 31-Dec License Fee Dr ($4,920 / 12*8) $3,280.00      To Prepaid Taxes $3,280.00 (To record adjusting entry of city of taxes) 31-Dec Property Taxes Dr $18,510.00      To Prepaid Taxes payable $18,510.00 (Being property tax accrued)

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