Question

On March 15, Calloway, Inc., paid property taxes of $525,000 for the calendar year. The journal entry at March 15 to record the payment of property taxes would include which of the following?

a. A debit to Property Tax Expense of $480,000.
b. A credit to Cash of $120,000.
c. A debit to Pre paid Property Taxes of $360,000.
d. A credit to Prepaid Property Taxes of $40,000.

Answer 1

Solution and Explanation:

Since an amount of $120000 will be reported as the property taxes paid, calculate the amount to be reported as a preapid expense.

Prepaid amount = $480000 minus $120000 = $360000

The journal entry for passing is as follows:

date description debit credit

3/15 property tax expense 120000

Prepaid property taxes 360000

cash 480000

Thus, an amount of $360000 will be debited towards the prepaid taxes

thus, the best choice is C, A debit to prepaid property taxes $360000