Question

We receive a bill on December 31 for $5,000 of property taxes we owe for the old year that we will not pay until January 6 of the new year. Give the adjusting entry at December 31 to record the taxes that we owe.

Answer 1

The adjusting entry at December 31 to record the taxes that you owe is a debit to Property Tax Expense and a credit to Property Tax Payable for $5,000.

Step-by-step explanation:

The adjusting entry at December 31 to record the taxes that you owe is a debit to Property Tax Expense and a credit to Property Tax Payable for $5,000.

This entry recognizes the tax expense for the old year and establishes a liability for the taxes that will be paid in the new year. By recording this adjusting entry, you are ensuring that your financial statements reflect the correct amount of taxes owed and the corresponding expense for the old year.