Question
Northern Corporation began operations in January 2011, and purchased a machine for $20,000. Northern uses straight-line depreciation over a four-year period for financial reporting purposes.
Northern Corporation began operations in January 2011, and purchased a machine for $20,000. Northern uses straight-line depreciation over a four-year period for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2011, 30% in 2012, and 20% in 2013. Pretax accounting income for 2011 was $150,000, which includes interest revenue of $20,000 from municipal bonds. The enacted tax rate is 40% for all years. There are no other differences between accounting and taxable income. a, Prepare a well-labeled table that reconciles pre-tax accounting income to taxable income and calculate income taxes due for the year 2011.
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