Blake Corporation provided the following information related to income taxes for 2018.

1. The interest received on government bonds amounted to $15,000.

2. Blake reported that depreciation for tax return was $160,000 more than depreciation reported on the income statement. Over the period 2019-2022, this difference will reverse in equal amounts.

3. On January 1, 2018, rent received in advance was $60,000 for a 3 year period, $40,000 of which was reported as unearned as at December 31 for book purposes.

4. The tax rates are 35% for 2018 and 30% for 2019 and subsequent years.

5. Income taxes of $357,000 are due per the tax return for 2018.

6. No deferred taxes existed at the beginning of 2018.

Instructions

(a) Compute taxable income for 2018. (1 mark)

(b) Compute pre-tax financial income for 2018. (4 marks)

(c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2018 and 2019. Assume taxable income was $1,200,000 in 2019.

(8 marks)

(d) Prepare the income tax expense section of the income statement for 2018, beginning with Income before income taxes. (4 marks)