[Oimie]

On July 1, Year 1, Ran County issued realty tax assessments for its fiscal year ended June 30, Year 2. On September 1, Year 1, Day Co. purchased a warehouse in Ran County. The purchase price was reduced by a credit for accrued realty taxes. Day did not record the entire year’s real estate tax obligation, but instead records tax expenses at the end of each month by adjusting prepaid real estate taxes or real estate taxes payable, as appropriate. On November 1, Year 1, Day paid the first of two equal installments of $12,000 for realty taxes. What amount of this payment should Day record as a debit to real estate taxes payable?

This was how this question looks to me: “On July 1, Year 1, Ran County #$#%$^%&% 54#%^4756&%^ &$$%$%4 43%#$%#$%$%#%^ (&*)(@#%$ ^&#%$#@#$@#$@$!%*&&*($%# What amount of this payment should Day record as a debit to real estate taxes payable?”

I would really love to answer the question but I have no idea what’s this story saying. Can someone break down the story in simple terms.

1) Ran Country issued realty tax assessments – What is this? I Googled it but I’m not seeing what the role is in this question.

2) The purchased price was reduced by a credit for accrued realty taxes – What does this even mean?

3) Day did not record the entire year’s real estate tax obligation, but instead records tax expenses at the end of each month by adjusting prepaid real estate taxes or real estate taxes payable, as appropriate. – What?

T_T

FAR 85 June 2015
AUD 80 Nov 2015
REG 83 Nov 2015
BEC 79 Feb 2016

[mla1169]

So a municipality issues real estate tax bills on the first day of their fiscal year. Change ran county to the town or county you live in.

Day buys a piece of property and apparently the seller hadn't paid any of that years' property taxes yet, so they reduce the selling price of the property by the amount of taxes already owed so the buyer will pay them.

Day makes two payments that total 24k. All goes to prepaid and not to an expense. So if they expense it monthly it's the total annual tax (24k) divided by 12 months, or $2k per month.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Author]

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