pierce co has a june 30 fiscal year end. it estimated its annual property taxes to be 24000 based on last year's property tax bill and have accrued 2000 of property tax each month to marcher 31. its actual property tax assessment, received on april 30 is 25200 for the calendar year. the property tax bill is payable on july 15. how much property tax expense will pierce report on its june 30 income statement? how much property tax patyable and or prepaid property tax will pierce report at june 30 on its balance sheet?
show work or provide journal entries thanks!
To calculate the property tax expense that Pierce will report on its June 30 income statement, we need to determine the total property tax expense for the fiscal year.
Step 1: Calculate the accrued property tax expense from July 1 to March 31.
From July 1 to March 31, there are 9 months (April to June is excluded).
Accrued property tax per month: $2,000
Accrued property tax from July to March: $2,000 x 9 = $18,000
Step 2: Calculate the adjustment for the actual property tax assessment received on April 30.
Actual property tax assessment: $25,200
Accrual from July to March: $18,000
Adjustment required: $25,200 - $18,000 = $7,200
Step 3: Calculate the total property tax expense for the fiscal year.
Total property tax expense: Accrual from July to March + Adjustment
Total property tax expense: $18,000 + $7,200 = $25,200
Therefore, Pierce will report $25,200 as the property tax expense on its June 30 income statement.
Now let's calculate the property tax payable and prepaid property tax to be reported on Pierce's June 30 balance sheet.
Step 1: Calculate the prepaid property tax as of June 30.
Prepaid property tax as of March 31: Accrual from July to March = $18,000
Prepaid property tax as of June 30: Prepaid property tax as of March 31 + Accrual from April to June
Since the fiscal year ends on June 30, the property tax for April, May, and June is prepaid.
Accrual from April to June: $2,000 x 3 = $6,000
Prepaid property tax as of June 30: $18,000 + $6,000 = $24,000
Step 2: Calculate the property tax payable as of June 30.
Property tax payable as of June 30: Actual property tax assessment - Prepaid property tax
Property tax payable as of June 30: $25,200 - $24,000 = $1,200
Therefore, Pierce will report $24,000 as prepaid property tax and $1,200 as property tax payable on its June 30 balance sheet.
Journal entries:
To record the accrued property tax:
Debit: Property Tax Expense (Income Statement) - $18,000
Credit: Property Tax Payable (Balance Sheet) - $18,000
To record the adjustment for the actual property tax assessment:
Debit: Property Tax Expense (Income Statement) - $7,200
Credit: Property Tax Payable (Balance Sheet) - $7,200
To record the prepaid property tax:
Debit: Prepaid Property Tax (Balance Sheet) - $24,000
Credit: Property Tax Expense (Income Statement) - $24,000
Please note that this answer is based on the information provided, and if there are any specific regulations or accounting policies in place, they should be taken into consideration while preparing financial statements.