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A company accrues $500 of property tax each month against a $6,000 annual bill paid at year-end. What is the balance of Taxes Payable on the statement of financial position at 30 June (after six monthly accruals)?
A$500
B$3,000
C$6,000
D$2,500
Answer & Solution
Correct answer: B. $3,000
1. Monthly accrual $= \$500$.
2. From January to June inclusive is six months.
3. Balance $= 6 \times 500 = 3{,}000$.
4. So B is correct; A is one month, C is the full year, and D would be only five months.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.5.1 "Taxes—Accrued Expense", p.85_