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 $676,000 766,000 726,000 732,000 Collections $636,000 794,000 718,000 736,000 Pretax Accounting Income $202,000 276,000 244,000 216,000 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. (lf no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

record 2021, 2022, 2023 income taxes

Answer 1

Answer:

Journal Entries
Description	Debit ($)	Credit ($)
Year 2021
Tax Expense   ($ 276000*25%)	69000
Deferred Tax Liability ($ 794000 - $ 766000) *25%	7000
Taxes Payable		76000
(Tax Expenses and Deferred Tax Liability for 2021, recorded)
Year 2022
Tax Expense   ($ 244000*25%)	61000
Deferred Tax Liability ($ 726000- $ 718000) *25%		2000
Taxes Payable		59000
(Tax Expenses and Deferred Tax Liability for 2022, recorded)
Year 2023
Tax Expense   ($ 216000*0.25%)	54000
Deferred Tax Liability ($ 736000 - $ 732000) *0.25%	1000
Taxes Payable		55000
(Tax Expenses and Deferred Tax Liability for 2023, recorded)