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 current calendar year of $45,000. a) Journalize the two adjusting entries required to bring accounts affected by the two taxes up to date as of December 31, the end of current year. b) what is the amount of tax expense?

Question

Business

Gunnar Crosby

15 September, 15:24

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 current calendar year of $45,000. a) Journalize the two adjusting entries required to bring accounts affected by the two taxes up to date as of December 31, the end of current year. b) what is the amount of tax expense?

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Irvin Crosby · Answer 1

12,320

57,320

Explanation:

Given:

Total Tax = $18,480 (For 12 months)

Annual Tax on Property = $45,000

Calender's Year (1st Jan - 31st Dec)

Computation.

A. Tax for (1st May - 31st Dec)

($18,480 / 12 month) x 8 month

= $1,540 x 8

= $12,320

Taxes expense = $12,320

Prepaid tax = $12,320

B. Total Amount of tax Expense

Tax Expense = $12,320

Add: Annual Tax = $45,000

Total tax expenses = $57,320