Mason Company paid its annual property taxes of $240,000 on February 15, 20X9. Mason also anticipates that its annual repairs expense for 20X9 will be $1,200,000. This amount is usually incurred and paid in July and August when operations are shut down so that machinery and equipment can be repaired. What amount should Mason deduct for property taxes and repairs in each quarter for 20X9?

$360,000 per quarter

Explanation:

we must allocate both property taxes and annual repairs expenses equally to each quarter:

total payments = property taxes + annual repairs = $240,000 + $1,200,000 = $1,440,000

allocation to each quarter = $1,440,000 / 4 quarters = $360,000 per quarter

Accrual accounting states that expenses must be recorded when they occur and not necessarily when they are associated with a cash outflow. Since both payments involve the whole year, they must be distributed equally in all 4 quarters.

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