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Leila’s Hosiery Inc. (LHI) is a publicly accountable entity and is finalizing its year end

financial statements. The only accounting entry outstanding is the income taxes

payable. The following information relates to its year ended December 31, 2021:

• Net income before income taxes was $1,200,000.
• Warranty expense was $85,000. Actual warranty claims paid were $70,000.
• LHI claimed capital cost allowance of $230,000. Depreciation on capital assets was $275,000.
• Dividends received from a taxable Canadian corporation were $12,000 and were recorded as investment income.
• LHI paid a $15,000 fine to the Canadian government for false advertising. LHI reported this expenditure as an expense on its statement of comprehensive income.
• LHI’s pension expense for the year was $30,000, and it remitted (paid) $34,000 to its pension trustee.

Required:

Calculate LHI’s taxable income for the December 31, 2021, taxation year. (4.5 marks)