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	$	700,000		$	660,000		$	226,000
2021		790,000			818,000			300,000
2022		750,000			742,000			268,000
2023		756,000			760,000			240,000

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

		2021	2022	2023
	Pre tax Accounting Income	$    300,000.00	$    268,000.00	$    240,000.00
	Add Collections	$    818,000.00	$    742,000.00	$    760,000.00
	Less Service Revenue	$ (790,000.00)	$ (750,000.00)	$ (756,000.00)
	Taxable income	$    328,000.00	$    260,000.00	$    244,000.00
	Income tax @ 25% of taxable Income	$      82,000.00	$      65,000.00	$      61,000.00
		2020	2021	2022	2023
A	Beg Service Revenue Recievable		$      40,000.00	$      12,000.00	$    20,000.00
B	Service Revenue	$    700,000.00	$    790,000.00	$    750,000.00	$ 756,000.00
C	Service Revenue Collection	$    660,000.00	$    818,000.00	$    742,000.00	$ 760,000.00
D	End Service Revenue Recievable (A+B-C)	$      40,000.00	$      12,000.00	$      20,000.00	$    16,000.00
E	Taxable	$      40,000.00	$    (28,000.00)	$        8,000.00	$    (4,000.00)
F	Deferred Tax Liability @ 25%	$      10,000.00	$      (7,000.00)	$        2,000.00	$    (1,000.00)
Date	Particulars	Debit	Credit
31-Dec-21	Income tax Expense	$      82,000.00
	Deferred tax Liability	$        7,000.00
	Income Tax Payable		$      89,000.00
31-Dec-22	Income tax Expense	$      65,000.00
	Deferred tax Liability		$        2,000.00
	Income Tax Payable		$      63,000.00
31-Dec-23	Income tax Expense	$      61,000.00
	Deferred tax Liability	$        1,000.00
	Income Tax Payable		$      62,000.00