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:

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. Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 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.)

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 730,000 760,000 235,000

Explanation / Answer

SOLUTION

2017-

Journal Entry-

2018-

Journal Entry-

2019-

Journal Entry-

2020-

Journal Entry-

Amount ($) Pretax accounting income 220,000 Deduct: Service revenue (688,000) Add: Cash collections 653,000 Taxable income 185,000

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