The records for Big Ink, a chain of tattoo parlors, show the following data for Year 6:

Entertainment expense was $32,000. Fines for operating without a business license were $12,000.

Dividends received from a taxable Canadian corporation were $4,000.

Automated tattoo machinery was acquired on January 1, Year 5, for $220,000 plus the last 4 digits of your student number. For example, if your student number is T00054768, then the cost of the equipment is $224,768. Use your own student number. Straightline depreciation is over a tenyear life with a $20,000 residual value. For taxes, the 30% rate class is used, and Big Ink applied the CRA one-and-a-half-year rule in Year 5.

On December 31, Year 6, Big Ink accrued a provision for legal expense of $60,000. The related estimated legal liability of $60,000 relates to 4 pending lawsuits. Actual legal costs paid in cash during Year 6 were $90,000. These all related to lawsuits that were started and settled during Year 6. Therefore, total legal expense for the year was $150,000. Big Ink believes that better employee training and the new automated equipment will reduce the number of lawsuits. Big Ink has a FVNI investment in shares. For Year 6, there was an unrealized gain of $16,000 plus the last three digits of your student number. For example, if your student number is T00062781, then the unrealized gain is $16,781. Use your own student number.

Pretax accounting income for Year 6 is $940,000. The income tax rate is 30%.

Required:

a. Prepare a schedule (starting with pretax accounting income) to calculate taxable

income. On your schedule, show permanent differences first, and then indicate a subtotal for accounting income plus and/or minus permanent differences. Label your work. Make your schedule clear for possible part marks. Type the schedule in the form below.

b. Prepare the journal entries to record income taxes for Year 6.