At December 31, 2016, the End of the First Year

question 8

Essay

At December 31, 2016, the end of the first year of operations at Xavion Inc., the firm's accountant neglected to accrue payroll taxes of $55,400 that were applicable to payrolls for the year then ended.(a.) Write the journal entry or use the horizontal model to show the effect of the accrual that should have been made as of December 31, 2016.(b.) Determine the income statement and balance sheet effects of not accruing 2016 payroll taxes at December 31, 2016 (assuming that the payroll taxes were not accrued, as originally stated).(c.) Assume that when the payroll taxes were paid in January 2017, the payroll tax expense account was charged. Assume that at December 31, 2017, the accountant again neglected to accrue the payroll tax liability, which was $40,800 at that date. Determine the income statement and balance sheet effects of not accruing 2017 payroll taxes at December 31, 2017.

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Definitions:

Book Value

The net value of a company's assets found on its balance sheet, calculated as total assets minus intangible assets and liabilities.

Accumulated Depreciation

The total depreciation charged over an asset's life, reducing its book value.

Trade-In Allowance

The amount of money a dealer subtracts from the price of a new item when you give them your old item as part of the payment.

Book Value

The value of an asset as it appears on the balance sheet, calculated by subtracting any associated depreciation or amortization from its original cost.