Question

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2020-2023 are as follows: Service Revenue $720,000 810,000 770.000 776,000 Collections S680.000 838,000 762.000 780,000 Pretax counting Income $246.000 320.000 288,000 260.000 2022 2023 There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25% (Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2020- 2023.) Required: 1. to 3. Prepare the appropriate journal entries to record Alsup's 2021 income taxes, 2022 income taxes and 2023 Income taxes. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in thousands (e.g. 150,000 should be entered as 150).) View transaction list Journal entry worksheet

Answer 1

Requirement 1 Related Asset - Cumulative Balance Collections Service Revenue Service Revenue Previous Current Receivable Bal. 2020 40000 2021 810000 40000 798000 12000 2022 770000 12000 750000 20000 2023 776000 20000 760000 16000 Current Future Taxable 2021 320000 Pretax accounting income Temporary difference 2020 services 2021 services -40000 40000 - 12000 12000 348000 25% 25% Taxable income income tax return) Enacted tax rate Tax payable currently Deferred tax liability 87000 3000 Deferred tax liability: Ending balance (balance currently needed) Less: Beginning balance: ([$720-680] x 25%) Change needed to achieve desired balance 3000 -10000 - 7000 Income tax expense (to balance) a/c Dr. Deferred tax liability (determined above) a/c Dr. To Income tax payable (determined above) 80000 7000 87000

Requirement 2 Future Taxable Current 2022 288000 Pretax accounting income Temporary difference 2021 services 2022 services - 12000 12000 -20000 20000 Taxable income (income tax return) 280000 25% 25% Enacted tax rate Tax payable currently Deferred tax liability 70000 5000 5000 Deferred tax liability: Ending balance (balance currently needed) Less: Beginning balance: Change needed to achieve desired balance -3000 2000 Income tax expense (to balance) a/c Dr. 72000 To Deferred tax liability (determined above) To Income tax payable (determined above) 2000 70000 Requirement 3 Current Future Taxable 2023 260000 Pretax accounting income Temporary difference 2022 services 2023 services -20000 20000 - 16000 16000 264000 25% 25% Taxable income income tax return) Enacted tax rate Tax payable currently Deferred tax liability 66000 4000 Deferred tax liability: Ending balance (balance currently needed) Less: Beginning balance: Change needed to achieve desired balance 4000 -5000 -1000 Income tax expense (to balance) a/c Dr. 65000 Deferred tax liability (determined above) a/c Dr. 1000 To Income tax payable (determined above) 66000