Question

question1

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	$	700,000		$	660,000		$	226,000
2021		790,000			818,000			300,000
2022		750,000			742,000			268,000
2023		756,000			760,000			240,000

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.)

question2

In 2021, Ryan Management collected rent revenue for 2022 tenant occupancy. For financial reporting, the rent is recorded as deferred revenue and then recognized as revenue in the period tenants occupy rental property. For tax reporting, the rent is taxed when collected in 2021. The deferred portion of the rent collected in 2021 was $126 million. Taxable income is $560 million in 2021. No temporary differences existed at the beginning of the year, and the tax rate is 25%.
  
Prepare the appropriate journal entry to record income taxes in 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
  

question 3

Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid to satisfy warranties on its product sales. For tax purposes, the expense is deducted when the warranty work is completed. At December 31, 2021, Lance has a warranty liability of $2 million and taxable income of $85 million. At December 31, 2020, Lance reported a deferred tax asset of $451,000 related to this difference in reporting warranties, its only temporary difference. The enacted tax rate is 25% each year.

Required:
Prepare the appropriate journal entry to record Lance’s income tax provision for 2021. (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.)

question 4

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

	($ in thousands)
	Situation
	1				2				3				4
Taxable income	$	148			$	280			$	324			$	452
Future deductible amounts		16								20				20
Future taxable amounts						16				16				92
Balance(s) at beginning of the year:
Deferred tax asset		2								25				4
Deferred tax liability						8				2

The enacted tax rate is 25%.

Required:
For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.)

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

	($ in thousands)
	Situation
	1				2				3				4
Taxable income	$	148			$	280			$	324			$	452
Future deductible amounts		16								20				20
Future taxable amounts						16				16				92
Balance(s) at beginning of the year:
Deferred tax asset		2								25				4
Deferred tax liability						8				2

The enacted tax rate is 25%.

Required:
For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.)

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

	($ in thousands)
	Situation
	1				2				3				4
Taxable income	$	148			$	280			$	324			$	452
Future deductible amounts		16								20				20
Future taxable amounts						16				16				92
Balance(s) at beginning of the year:
Deferred tax asset		2								25				4
Deferred tax liability						8				2

The enacted tax rate is 25%.

Required:
For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.)

Answer 1

Calculation of profir after tax

2020 2021 2022 2023

Accounting income 226000 300000 268000 240000

Less Tax expense

current tax@25% 165000 204500 185500 190000

  Deferred tax 10000 (7000) 2000 (1000)

Profit after Tax 51000 102500 80500 51000

W.N 1   calculation of current tax

Year Taxable income tax amount @ 25%

2020 660000 165000

2021 818000 204500

2022 742000 185500

2023 760000 190000

W.N 1   calculation of defered  tax

2020 2021 2022 2023

opening timing difference 0 40000 12000 20000

addition 40000 0 8000 0

deletion    0 (28000) 0 (4000)

closing timing difference 40000 12000 20000 16000

DTA/DTL 10000 3000 5000 4000

charged to profit loss account 10000 DTL    ( 7000) DTA    2000 DTL (1000)DTA

journal enteries

year particulars Debit Credit

2020 Profit/loss a/c 165000

To provision for tax 165000

2020 Profit/loss a/c 10000

To    Deffered tax liability 10000

2021 Profit/loss a/c 204500

To provision for tax 204500

2021   Deffered tax liability 7000

To Profit/loss a/c 7000

2022     Profit/loss a/c 185500

To provision for tax 185500

2022 Profit/loss a/c 2000

To Deffered tax liability 2000

2023 Profit/loss a/c 190000

To provision for tax 190000

2023 Deffered tax liability 1000

To Profit/loss a/c 1000

  

Ouestion No.2

journal enteries for year 2021 in books of Ryan Amount 'in $'

Year Particulars Debit Credit

2021 Profit & loss account Dr 140

To Provision for income tax 140

2021 Deffered tax Assets 31.5

To Profit/loss a/c 31.5

Ouestion No.3 Journal enteries for Year 2021

year particulars Debit Credit

2021 Profit & loss account Dr 2125000

To Provision for income tax 2125000

2021 Profit/Loss A/c     451000

To Deferred Tax Assets 451000

2021 Profit & loss account Dr 9000

To Deferred Tax Liability 9000

Question No.4 calculation of defered  tax

Situation 1    2 3 4   

Future Deductable 16 0 20 20

Future Taxable    0 (16 ) (16) (92)

Net Taxable/Deductable 16 0 4 (72)

DTA/(DTL ) 4 (4) 1 ( 18)

Less: Opening DTA/(DTL ) 2 (8) 23(net) 4

charged to profit loss account 2 (DTA) 4 (DTA)   (22) (DTL) (22)(DTL)

tax expense 1 2 3 4

current tax@25% 37 70 81 113   

  Deferred tax (2 ) (4 ) 22     22

Total 35 66 103 135