Amount of tax expense

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Question:

Karysa CO. operates in a city in which real estate tax billsfor one year are issued in May of the subsequent year. Thyus taxbills for 2008 are issued in May 2009 and are apyable in July2009.

Required:

A. Explain how the amount of tax expense for calender 2008 andthe amount of taxes payable (if any) at December 31, 2008, can bedetermined.

B. Use the horizontal model ( or write the journal entry)to show the effect of accruing 2008 taxes of $7200 at Dec. 31,2008.

C. Assume that the actual tax bill, received in May 2009, wasfor & $7500. Use the horizontal model to show the appropriateadjustment to the amount previously accrued.

D. Karysa Co.'s real estate taxes have been increasing at therate of 10% annually. Determe the income statement and balancesheet effects of not accruing 2008 taxes at Dec. 31, 2008.(Assuming that taxes in b are not accrued)

Reference no: EM13257217

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