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

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:

     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.)

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.)

1. Record 2016 income taxes.

2. Record 2017 income taxes.

3. Record 2018 income taxes.

Service Revenue Collections Pretax Accounting
Income   2015 $ 637,000 $ 617,000 $ 180,000   2016 740,000 750,000 245,000   2017 705,000 670,000 215,000   2018 690,000 710,000 195,000

     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.)

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.)

1. Record 2016 income taxes.

2. Record 2017 income taxes.

3. Record 2018 income taxes.

Explanation / Answer

Service revenue receivable balance is prepared as under:

Service Revenue Collections of previous year Collections of current year Service Revenue receivable balance   2015 6,37,000 - 6,17,000 20,000   2016 7,40,000 20,000 7,30,000 10,000   2017 7,05,000 10,000 6,60,000 45,000   2018 6,90,000 45,000 6,65,000 25,000

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