Question
In: Accounting
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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 | $ | 624,000 | $ | 599,000 | $ | 160,000 | |||
| 2016 | 720,000 | 730,000 | 225,000 | ||||||
| 2017 | 685,000 | 660,000 | 195,000 | ||||||
| 2018 | 670,000 | 690,000 | 175,000 | ||||||
|
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.) |
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Expert Solution
| Year 2015 | ||
| Pretax accounting income | $160,000.00 | |
| Less: Service Revenue | -$624,000.00 | |
| Add: Cash collections | $599,000.00 | |
| Taxable income | $135,000.00 | |
| Journal Entry | Amt. in Thousands | |
| Tax Expenses | $64.00 | |
| Deferred tax liability (40% x (624,000 - $599,000)/1000 | $10.00 | |
| Taxes payable (40% x 135,000)/1000 | $54.00 | |
| Year 2016 | ||
| Pretax accounting income | $225,000.00 | |
| Less: Service Revenue | -$720,000.00 | |
| Add: Cash collections | $730,000.00 | |
| Taxable income | $235,000.00 | |
| Journal Entry | Amt. in Thousands | |
| Tax Expenses | $90.00 | |
| Deferred tax liability (40% x (730,000 - $720,000)/1000 | $4.00 | |
| Taxes payable (40% x 235,000)/1000 | $94.00 | |
| Year 2017 | ||
| Pretax accounting income | $195,000.00 | |
| Less: Service Revenue | -$685,000.00 | |
| Add: Cash collections | $660,000.00 | |
| Taxable income | $170,000.00 | |
| Journal Entry | Amt. in Thousands | |
| Tax Expenses | $78.00 | |
| Deferred tax liability (40% x (685,000 - $660,000)/1000 | $10.00 | |
| Taxes payable (40% x 170,000)/1000 | $68.00 | |
| Year 2018 | ||
| Pretax accounting income | $175,000.00 | |
| Less: Service Revenue | -$670,000.00 | |
| Add: Cash collections | $690,000.00 | |
| Taxable income | $195,000.00 | |
| Journal Entry | Amt. in Thousands | |
| Tax Expenses | $70.00 | |
| Deferred tax liability (40% x (690,000 - $670,000)/1000 | $8.00 | |
| Taxes payable (40% x 195,000)/1000 | $78.00 |
ekkarill92 answered 1 year agoRelated Solutions
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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:
Service Revenue
Collections
Pretax Accounting
Income
2017
$
661,000
$
626,000
$
190,000
2018
750,000
760,000
255,000
2019
715,000
685,000
225,000
2020...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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 $ 688,000 $ 648,000 $ 214,000 2021 778,000
806,000 288,000 2022 738,000 730,000 256,000 2023...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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
$
728,000
$
688,000
$
254,000
2021
818,000
846,000
328,000
2022
778,000
770,000
296,000
2023...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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
$
741,000
$
716,000
$
290,000
2016
850,000
855,000
355,000
2017
815,000
795,000
325,000...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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:
Service Revenue
Collections
Pretax Accounting
Income
2017
$
688,000
$
653,000
$
220,000
2018
780,000
795,000
285,000
2019
745,000
715,000
255,000
2020...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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: Service Revenue Collections Pretax
Accounting Income 2017 $ 610,000 $ 590,000 $ 150,000 2018 710,000
720,000 215,000 2019 675,000 650,000 185,000 2020...
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement,...
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: Service Revenue Collections Pretax
Accounting Income 2017 $ 610,000 $ 590,000 $ 150,000 2018 710,000
720,000 215,000 2019 675,000 650,000 185,000 2020...
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