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 2015–2018 are as follows: Service Revenue Collections Pretax Accounting Income   2015 $ 616,000 $ 581,000 $ 140,000   2016 700,000 710,000 205,000   2017 665,000 645,000 175,000   2018 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%.

(Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2015–2018.)

Required:

1.

Prepare the appropriate journal entry to record Alsup's 2016 income taxes, Alsup’s 2017 income taxes and Alsup’s 2018 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.) No Event General Journal Debit Credit 1(2016) 1 Income tax expense Deferred tax liability Income tax payable 2(2017) 2 Income tax expense Deferred tax liability Income tax payable 3(2018) 3 Income tax expense Deferred tax liability Income tax payable

Answer 1