orth Dakota Corporation began operations in January 2015 and purchased a machine

Question

orth Dakota Corporation began operations in January 2015 and purchased a machine for $29,000. North Dakota uses straight-line depreciation over a four-year period for financial reporting purposes. For tax purposes, the deduction is 40% of cost in 2015, 30% in 2016, and 30% in 2017. Pretax accounting income for 2015 was $159,000, which includes interest revenue of $24,500 from municipal bonds. The enacted tax rate is 30% for all years. There are no other differences between accounting and taxable income. Required: Prepare a journal entry to record income taxes for the year 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Year 2015 2016 2017 Total Tax Depreciation $      11,600 $ 8,700 $8,700 $29,000 Depreciation as per Accounts $    7,250.00 Depreciation for Tax purpose $ 11,600.00 Timing difference $    4,350.00 Deferred Tax Liability for the year 2015 $    1,305.00 Pretax Income $159,000.00 Add: Accounting Depreciation(29000/4) $    7,250.00 $166,250.00 Less Tax Depreciation $ (11,600.00) Taxable Income $154,650.00 Income Tax @ 30% $ 46,395.00 Journal entry Debit Credit Profit and Loss Account $46395 Current Tax $46935 Amount of tax payable in 2015 Profit and Loss Account $1305 Deferred Tax Liability Account $1305 Deferred Tax Liability created in 2015 due to timing difference of depreciation

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.