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			Collections			Pretax Accounting Income
2020	$	664,000		$	624,000		$	190,000
2021		754,000			782,000			264,000
2022		714,000			706,000			232,000
2023		720,000			724,000			204,000

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 whole dollars.)

Answer 1

No.	Date	General Journal	Debit	Credit
1	2021	Income tax expense	70000
		Deferred tax liability (25% x $12000)	3000
		Income tax payable (25% x $292000)		73000
2	2022	Income tax expense	61000
		Deferred tax liability (25% x $20000)		5000
		Income tax payable (25% x $224000)		56000
3	2023	Income tax expense	48000
		Deferred tax liability (25% x $16000)	4000
		Income tax payable (25% x $208000)		52000

Working:

	2020	2021	2022	2023
Pretax accounting income	190000	264000	232000	204000
Less: Service revenue	-664000	-754000	-714000	-720000
Add: Collections	624000	782000	706000	724000
Taxable income	150000	292000	224000	208000
Service Revenue Receivable
	2020	2021	2022	2023
Beginning balance	0	40000	12000	20000
Add: Service revenue	664000	754000	714000	720000
Less: Collections	-624000	-782000	-706000	-724000
Ending balance	40000	12000	20000	16000