Part 2: Problems Problem 1 (20 points) North Dakota Corporation began operations
ID: 2392493 • Letter: P
Question
Part 2: Problems Problem 1 (20 points) North Dakota Corporation began operations in January 2017 and purchased a machine for $20,000. North Dakota uses straight-line depreciation over a four-year period for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2017, 30% in 2018, and 20% in 2019, Pretax accounting income for 2017 was $150,000, which includes interest revenue of $20,000 from municipal bonds. The enacted tax rate is 30% for all years. There are no other differences between accounting and taxable ncome. Required: Prepare a journal entry to record income taxes for the year 2017. Show well-labelled computations for the amount of income tax payable and the change in the deferred tax accountExplanation / Answer
Answer
working
deferred tax = 20000 * 50 % - 20000 / 4 = 5000
= 5000 * 30 %
= 1500
tax payable = 150000 - 20000 - 5000 = 125000
= 125000 * 30 %
= 37500
no particulars debit credit 1 income tax expense 39000 TO deferred tax liability 1500 TO income tax payable 37500