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 2012-2015 are as follows:
Service Revenue Collections Pretax Accounting Income2012 $718,000 $698,000 $270,0002013 830,000 840,000 335,0002014 795,000 775,000 305,0002015 780,000 805,000 285,000
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, 2012-2015.)Required:1. Prepare the appropriate journal entry to record Alsup's 2013 income taxes.2. Prepare the appropriate journal entry to record Alsup's 2014 income taxes.3. Prepare the appropriate journal entry to record Alsup's 2015 income taxes.

Answer 1

Answer:

Please see the attached Snapshot for a schedule showing service revenue receivable and below are the journal entries for the year 2013, 2014 and 2015 on Income Taxes.

Explanation:

1. 2013 Journal Entry

Alsup Consulting

Dated: December 31, 2013

Debit: Tax Expense $134,000

Debit: Deferred Tax Liability $4,000

Credit: Income Tax Payable $138,000

To record Income Tax Payable.

2. 2014 Journal Entry

Alsup Consulting

Dated: December 31, 2014

Debit: Tax Expense $108,000

Credit: Income Tax Payable $100,000

Credit: Deferred Tax Liability $8,000

To record Income Tax Payable.

3. 2015 Journal Entry

Alsup Consulting

Dated: December 31, 2015

Debit: Tax Expense $114,000

Debit: Deferred Tax Liability $10,000

Credit: Income Tax Payable $124,000

To record Income Tax Payable.