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Last year we paid $12,000 in property taxes. Thus, our best estimate is that taxes this...

Last year we paid $12,000 in property taxes. Thus, our best estimate is that taxes this year will be $1000/mo. Provide entries for estimated taxes; assume that on Oct. 31 we find out that taxes will be $15,000 for the year, and we pay that amount. Assume we have been accruing Property Tax Expense each month, but have not yet accrued it for October.

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Answer #1

Assuming we follow calendar year (Jan to Dec) for accounting purposes.

The shortfall in accrual of $3,000 ($12,000 - 15,000) should be accrued in the remaining 3 months in the year - Oct, Nov & Dec. Hence, accrual for these three months would be $2,000 each I.e. $1,000 initial accrual per month considering $12,000 per year plus shortfall of $3,000 by 3 months.

Journal entry would be;

Debit - IS Property tax expenses $2,000

Credit - BS property tax payable $2,000

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