Pacific Company reports pretax financial income of $120,000 for 2019. The following items cause taxable income to be different than pretax financial income.

1. Depreciation on the tax return is greater than depreciation on the income statement by $24,000.
2. Rent collected on the tax return is greater than rent earned on the income statement by $40,500.
3. Interest income on municipal government bonds of $32,000.
4. Fines for pollution appear as an expense of $16,500 on the income statement.

Pacific's tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2019.

Required: Show detailed solutions to earn step points!

1. Determine the taxable income, and prepare the journal entries to record income taxes in 2019.

2. Prepare the income tax expense section of the income statement for 2019, beginning with the line "Income before income taxes." Use the following format.

Partial Income Statement for 2019
Income before income taxes		___________________
Income tax expense
Current	_____________________
Deferred	_____________________	___________________
Net income		___________________