Melik Ltd. engages in activity that qualifies for investment tax credits (ITCs) in 20X6. The company has a tax rate of 32% and deducts the deferred investment credit from the asset on the balance sheet. It has a 31 December year-end and records annual adjusting entries. The following information is available for 20X6:
1. On 1 July 20X6 Melik Ltd acquired an asset that is eligible for an ITC. The machinery cost $200,000 in cash and it was decided to depreciate it straight-line over 10 years. The CCA rate for this asset is 30%. Depreciation has not yet been calculated or recorded.
2. Pre-tax income for 20X6 is $320,000, before considering depreciation and ITC amortization.
3. The investment tax credit is offered at a 8% rate and has not yet been calculated or recorded.

Required:
1. Briefly explain what an investment tax credit is and how it benefits Melik Ltd.
2. Provide journal entries to record the following:
a. The purchase of assets that qualify for investment tax credit in 20X6
b. The investment tax credit at 31 December 20X6
c. Depreciation expense at 31 December 20X6
d. Amortization of the investment tax credit at 31 December 20X6.
e. Income taxes for 20X6. Show all your calculations.