Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 24

Other accrued liabilities-real estate taxes Glennelle's Boutique, Inc., operates in a city in which real estate tax bills for one year are issued in May of the subsequent year. Thus, tax bills for 2016 are issued in May 2017 and are payable in July 2017.
Required:
a. Explain how the amount of tax expense for calendar 2016 and the amount of taxes payable (if any) at December 31, 2016, can be determined.
b. Use the horizontal model (or write the journal entry) to show the effect of accruing 2016 taxes of $12,800 at December 31, 2016.
c. Assume that the actual tax bill, received in May 2017, was for $13,600. Use the horizontal model (or write the journal entry) to show the effects of the appropriate adjustment to the amount previously accrued.
d. Determine the income statement and balance sheet effects of not accruing 2016 taxes at December 31, 2016 (assuming that taxes in b are not accrued).