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 2017–2020 are as follows:

Service Revenue Collections Pretax Accounting
Income 2017 $ 650,000 $ 620,000 $ 186,000 2018 750,000 770,000 250,000 2019 715,000 700,000 220,000 2020 700,000 720,000 200,000 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 10 points 2017 2018 019 2020 Service Revenue $650,000 750,000 715,000 700,000 Collections $620,000 770,00e 700,000 726,00 Pretax Accounting Income $186,008 250,00 220,000 200,000 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. to 3. Prepare the appropriate journal entries to record Alsup's 2018 income taxes, 2019 income taxes and 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.) Answer is complete but not entirely correct. No Event General Journal Debit Credit Income tax expense Deferred tax liability 100,000 8,000 Income tax payable 108,000 Income tax expense 88,000 Deferred tax liability Income tax payable 6,000 82,000 Income tax expense Deferred tax liability 80,000 8,000 Income tax payable 88,000

Explanation / Answer

1 to 3) The answer submitted by you above is completely correct but there is a requirement in the question that answers should be entered in thousands (written in bracket form in red colour in the requirement of the question). Therefore the required journal entry will be as follows:-

Journal Entries (Amounts in thousands $)

No Event General Journal Debit Credit 1 1 Income Tax Expense ($250,000*40%) 100 Deferred Tax Liability ($108,000-$100,000) 8 Income Tax Payable [($250,000+$20,000)*40%] 108 2 2 Income Tax Expense ($220,000*40%) 88 Deferred Tax Liability ($88,000 - $82,000) 6 Income Tax Payable [($220,000 - $15,000)*40%] 82 3 3 Income Tax Expense ($200,000*40%) 80 Deferred Tax Liability ($88,000 - $80,000) 8 Income Tax Payable [($200,000+$20,000)*40%] 88

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