[SRT8]

Becker Question –

This question throws a lot of information at you so I think the best thing to do is break it all down and draw it out like the explanation shows you. It states that the property tax assessments are for the year ended June 30th, so the start of the year must be July 1st. Don’t let the May 1st assessment date throw you off. Suppose the tax assessment was for $1,200. On the date of the first payment, November 1st, we would be paying $600 since it is equal to one half of the assessment. From July to November we’ve accrued 4 months of interest expense/interest payable, however, we’re paying 6 months worth. The excess is prepaid taxes for the months of November and December.

So the total payment is $600-

$400 is decreasing our interest payable that we’ve accrued for July 1st -October 31st

$200 is increasing our prepaid taxes for November 1st – December 31st

$400/$600 = 66 2/3

$200/$600 = 33 1/3

The building has nothing to do with this specific question, it’s just a distractor! Hope this helps a little!

AUD - 92 [5/31/11]
FAR - ___ [8/1/11]
BEC - 85 [8/31/11]
REG - ___ [10/17/11]

[SRT8]

smcilw1 – Thanks for the excellent explanation, makes perfect sense now! I hope I don't see a question worded like this one on the real exam.

Cheers

AUD - 92 [5/31/11]
FAR - ___ [8/1/11]
BEC - 85 [8/31/11]
REG - ___ [10/17/11]

[Author]

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