orth Dakota Corporation began operations in January 2015 and purchased a machine
ID: 2491769 • Letter: O
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.
Prepare a journal entry to record income taxes for the year 2015. Record the income taxes.
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.
Explanation / Answer
Answer: Journal Entry:
Income tax expense A/C Dr. (to balance)40350
To Deferred tax liability(change in deferred tax balance per below) A/c $1,305
To Income tax payable A/C $39045
Particulars 2015 Future taxable amount Accounting income 159000 Permanent diff – municipal bond interest -24500 Depreciation diff (29Kx40%) - (29Kx25%) -4350 4350 Taxable income 130150 4350 Enacted tax rate 30% 30% Tax payable currently 39045 1305 Deferred tax liability (4350 x 30%) 1305 Less: Beginning balance 0 Change in balance 1305Related Questions
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