Question

Problem 2: Lurgan Corp. purchased machinery for $250,000 on January 2, 2017, its first day of operations. For book purposes, the machinery will be depreciated using the straight-line method over five years with no salvage value. Pretax financial income and taxable income for 2017 are as follows: Pretax financial income $135,000 125,000 Taxable income This temporary difference is due to the use of accelerated depreciation for tax purposes. Instructions: Prepare the journal entry to record income taxes for 2017 (expense, deferral, and liability) assuming that the enacted tax rate over the life of the machinery is 30%



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