On December 31,2000, Adams Advertising Company was preparing its 2000 financial statements and estimated that its property taxes for the period from July |, 2000 to June 30, 2001 would be $50,000. On February 10, 2001, Adams received and paid its property tax bill for $50,000.

Required: (1) Using T-accounts, show how Adams should record the preceding events on

(a) December 31, 2000, and

(b) February 10, 2001.

(2) What would be the effect on the 2000 financial statements if Adams had not recorded its property taxes on December 31, 2000? Ignore income taxes.

 TYK-1