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%.

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.)

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:

Explanation / Answer

DEBIT CREDIT 31-Dec-16 Retained Earnings                82,000.00 Provision for tax           82,000.00 (Being provision for tax on $ 205,000 @ 40% towards income tax) Note: The accounting income is increased by $ 10,000 as collections are in excess of service revenue by $ 10,000 31-Dec-17 Retained Earnings                54,000.00 Provision for tax           54,000.00 (Being provision for tax on $ 135,000 @ 40% towards income tax) Note: The accounting income is reduced by $ 30,000 as collections are lesser than the service revenue by $ 30,000 31-Dec-18 Retained Earnings                66,000.00 Provision for tax           66,000.00 (Being provision for tax on $ 165,000 @ 40% towards income tax) Note: The accounting income is increased by $ 20,000 as collections are in excess of service revenue by $ 20,000

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