4 Alsup Consulting sometimes performs services for which it receives payment at

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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: 2017 2018 2019 2020 Service Revenue $660,000 760,000 725,000 710,000 Collections $635,000 770,000 700,000 735,000 Pretax Accounting Income $200,000 265,000 235,000 215,000 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% (Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017- 2020.) Required 1. Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup's 2019 income taxes and Alsup's 2020 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.) View transaction list

Explanation / Answer

ALSUP Consulting Year 2017 Pretax accounting income $              200,000.00 Less: Service Revenue $              660,000.00 Add: Cash Collection $              635,000.00 Taxable Income $              175,000.00 Journal Entry Particular Amount (Dr) Amount (Cr) Tax Expense $                80,000.00    To Deferred Tax Liability=($660000-$635000)*40% $           10,000.00    To Tax Payable($175000*40%) $           70,000.00 Year 2018 Pretax accounting income $              265,000.00 Less: Service Revenue $              760,000.00 Add: Cash Collection $              770,000.00 Taxable Income $              275,000.00 Journal Entry Particular Amount (Dr) Amount (Cr) Tax Expense $              106,000.00     Deferred Tax Liability=($770000-$760000)*40% $                   4,000.00    To Tax Payable($275000*40%) $         110,000.00 Year 2019 Pretax accounting income $              235,000.00 Less: Service Revenue $              725,000.00 Add: Cash Collection $              700,000.00 Taxable Income $              210,000.00 Journal Entry Particular Amount (Dr) Amount (Cr) Tax Expense $                94,000.00    To Deferred Tax Liability=($725000-$700000)*40% $           10,000.00    To Tax Payable($210000*40%) $           84,000.00 Year 2020 Pretax accounting income $              215,000.00 Less: Service Revenue $              710,000.00 Add: Cash Collection $              735,000.00 Taxable Income $              240,000.00 Journal Entry Particular Amount (Dr) Amount (Cr) Tax Expense $                86,000.00     Deferred Tax Liability=($735000-$710000)*40% $                10,000.00    To Tax Payable($240000*40%) $           96,000.00

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