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. 

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

(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.

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

Answer rating: 100% (QA)

Answer Explanation Part a Income tax as per Return a 357000 Tax rate for Year 20... View the full answer