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 income.
Required:
Prepare a journal entry to record income taxes for the year 2017. Show well-labeled computations for the amount of income tax payable and the change in the deferred tax account.

Question

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The Answer of 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 income.
Required:
Prepare a journal entry to record income taxes for the year 2017. Show well-labeled computations for the amount of income tax payable and the change in the deferred tax account.

North Dakota Corporation Began Operations in January 2017 and Purchased