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 2017–2020 are as follows:

	SERVICE REVENUE	COLLECTIONS	PRETAX ACCOUNTING INCOME
2017	$616,000	$581,000	$140,000
2018	700,000	710,000	205,000
2019	665,000	645,000	175,000
2020	650,000	675,000	155,000

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 40%.

Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes

Answer 1

Answes credit LF Debit Pauticulars Date $8a,c00 Income tox ezpense 2018 Defered taa liability (T10.000 -700,000 = 10,000-xu/) To Inome tar payable $4,000 $86,000 carsooox4o) for 2018) (Being to record the income taz of "A" Taxable inome: Particulas Amaunt retar acccunting incme Add : Cash collections $05,000 $710, 000 $700,000 Less: Sesvice revenue $215,000 Tasable income Date InGme tax expense Particulars Credet- Doo'hs4 $8000 2019 Defenred tax liability CGGS,000 - 645,000 =20,600K %) To InGme tar payable $69.000 CISS,O00x (Betng to recoid the income tar of Af Taxalde in Come! Particulars Amount retax accounting income Ad: Cash oilections $175,000 $ 645.000 Ley: Service revenue $G 6S,000 $155,000 Takable inome nate Partialas Income tar erpense Deferred tax liability (6T5000-G50,000=85000XV0/) To InGme tax paypble C180,000x yo/.) (Being to record income tax of A'for 2030) LF Debit credit 2020 $G2,000 $10,000 $72,000 Tazable inome : Pasticulars Prefar acounting income Add: Ggh Gllections Amournt $I55,000 $675000 $650,000 $ 180,000 Ley: Seruice vevenue Taxable inome