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: 2020 2021 2022 2023 Service Revenue $ 720, eee 810, eee 770,000 776,000 Collections $ 680, eee 838,00 762,00 780, Pretax Accounting Income $ 246, eee 320, eee 288, eee 260,000 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 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 < 1 2 3 Record 2021 income taxes. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal

Answer 1

Solution

к Computation of Taxable income and Tax Payable - Alsup Consulting Particulars 2021 2022 2023 Pre tax accounting income Add: Service revenue collection Less: service revenue as per books $320,000.00 $838,000.00 $810,000.00 $288,000.00 $762,000.00 $770,000.00 $260,000.00 $780,000.00 $776,000.00 Taxable income Income Tax (25%) $348,000.00 $87,000.00 $280,000.00 $70,000.00 $264,000.00 $66,000.00 15 16 17 18 34 35 36 37 38 39 meno persen) sen et276 Sheet276 (2) ) Sheet278 mens G Sheet279 Sheet322 (2) io

N. 2023 Computation of Temporary differences - Alsup Consulting Particulars 2020 2021 2022 Beginning service revenue receivables $0.00 $40,000.00 $12,000.00 Service Revenue $720,000.00 $810,000.00 $770,000.00 Collection $680,000.00 $838,000.00 $762,000.00 ending service revenue receivables $40,000.00 $12,000.00 $20,000.00 $20,000.00 $776,000.00 $ 780,000.00 7 $16,000.00 Taxable (Deductible Temporary differences) $40,000.00 $28,000.00 $8,000.00 $4,000.00 Deferred tax liability (reversal) for the year $10,000.00 $7,000.00 $2,000.00 $1,000.00 41 | 42 43 et276 Sheet276 (2) ) Sheet278 ) Sheet279 Sheet322 (2) 0

1. W 11 13 14 15 Credit (In '000) 16 Journal Entries - Alsup Consulting Date Particulars Debit (In '000) 31-Dec-21 Income tax expense Dr $80.00 Deferred tax liability Dr $7.00 To Income tax payable (To record income tax and deferred taxes) 17 $87.00 19 21 $72.00 31-Dec-22 Income tax expense Dr To Income tax payable To Deferred tax liability (To record income tax and deferred taxes) $70.00 $2.00 23 24 25 26 $65.00 $1.00 31-Dec-23 Income tax expense Dr Deferred tax liability Dr To Income tax payable (To record income tax and deferred taxes) 28 $66.00 30 31 32 33 34 35 36 37 38 39 40 41 42 44 46 48 49 50 51 52 53 54 55 56 et276 Sheet276 (2) ) Sheet278 Sheet279 Sheet322 (2) ID 0 <