Problem
Minnetonka Corporation began operations in January 2016 and purchased a machine for $20,000. Minnetonka used straight line depreciation over a four year period for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2016, 30% in 2017, and 20% in 2018. Pretax accounting income for 2016 was $150,000, which includes interest revenue of $20,000 from municipal bonds. the enacted tax rate is 30% for all years. there is no other differences between accounting and taxable income.
Prepare a journal entry to record income taxes for the year 2016. Show well labeled computations for the amount of income tax payable and the change in the deferred tax account.