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 2020–2023 are as follows:

	Service Revenue			Collections			Pretax Accounting Income
2020	$	692,000		$	652,000		$	218,000
2021		782,000			810,000			292,000
2022		742,000			734,000			260,000
2023		748,000			752,000			232,000

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 25%.

(Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2020–2023.)

Required:
1. to 3. Prepare the appropriate journal entries to record Alsup's 2021 income taxes, 2022 income taxes and 2023 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 whole dollars.)

1) Record 2021 Income Taxes

2) Record 2022 Income Taxes

3) Record 2023 Income Taxes

Answer 1

1) Taxable income in 2020:-

Particulars	Amount($)
Pretax Accounting Income	218000
Add : Collection	652000
Less : Service Revenue	(692000)
Taxable Income	178000

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
2020	Tax Expense A/c ($218000*25%)	54500
	Deferred Tax Liabilities A/c ($40000*25%)		10000
	Tax Payable A/c ($178000*25%)		44500
	(Being Record Tax Expenses for 2020)

2) Taxable income in 2021:-

Particulars	Amount($)
Pretax Accounting Income	292000
Add : Collection	810000
Less : Service Revenue	(782000)
Taxable Income	320000

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
2020	Tax Expense A/c ($292000*25%)	73000
	Deferred Tax Liabilities A/c ($28000*25%)	7000
	Tax Payable A/c ($320000*25%)		80000
	(Being Record Tax Expenses for 2021)

3) Taxable income in 2022:-

Particulars	Amount($)
Pretax Accounting Income	260000
Add : Collection	734000
Less : Service Revenue	(742000)
Taxable Income	252000

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
2020	Tax Expense A/c ($260000*25%)	65000
	Deferred Tax Liabilities A/c ($8000*25%)		2000
	Tax Payable A/c ($252000*25%)		63000
	(Being Record Tax Expenses for 2022)

4) Taxable income in 2023:-

Particulars	Amount($)
Pretax Accounting Income	232000
Add : Collection	752000
Less : Service Revenue	(748000)
Taxable Income	236000

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
2020	Tax Expense A/c ($232000*25%)	58000
	Deferred Tax Liabilities A/c ($4000*25%)	1000
	Tax Payable A/c ($236000*25%)		59000
	(Being Record Tax Expenses for 2023)