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a . A lease liability with 1 5 remaining lease payments of $ 1 0 , 0 0 0 each, due annually on January 1

a. A lease liability with 15 remaining lease payments of $10,000 each, due annually on January 1 :
Lease liability
The incremental borrowing rate at the inception of the lease was 11% and the lessor's implicit rate, which was known by CPS
Transportation, was 10%.
b. A deferred income tax liability due to a single temporary difference. The only difference between CPS Transportation's taxable
income and pretax accounting income is depreciation on a machine acquired on January 1,2023, for $500,000. The machine's
estimated useful life is five years, with no salvage value. Depreciation is computed using the straight-line method for financial
reporting purposes and the MACRS method for tax purposes. Depreciation expense for tax and financial reporting purposes for
2024 through 2027 is as follows:
The enacted federal income tax rates are 20% for 2023 and 25% for 2024 through 2027. CPS had a deferred tax liability of
$7,500 as of December 31,2023. For the year ended December 31,2024, CPS's income before income taxes was $900,000.
On July 1,2024, CPS Transportation issued $800,000 of 9% bonds. The bonds mature in 20 years, and interest is payable each
January 1 and July 1. The bonds were issued at a price to yield the investors 10%. CPS records interest at the effective interest
rate.
equired:
Determine CPS Transportation's income tax expense and net income for the year ended December 31,2024.
Determine CPS Transportation's interest expense for the year ended December 31,2024.
Prepare the long-term liabilities section of CPS Transportation's December 31,2024, balance sheet.
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