The long-term liabilities section of CPS Transportations December 31, 2020, balance sheet included the following: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. A lease liability with 15 remaining lease payments of $32,000 each, due annually on January 1:

Lease liability	$	243,395
Less: current portion		7,660
	$	235,735

The incremental borrowing rate at the inception of the lease was 11% and the lessors 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 Transportations taxable income and pretax accounting income is depreciation on a machine acquired on January 1, 2020, for $500,000. The machines 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 2021 through 2024 is as follows:

Year	MACRS Depreciation			Straight-line Depreciation			Difference
2021	$	152,000		$	100,000		$	52,000
2022		76,000			100,000			(24,000	)
2023		66,000			100,000			(34,000	)
2024		56,000			100,000			(44,000	)

The enacted federal income tax rates are 20% for 2020 and 25% for 2021 through 2024. CPS had a deferred tax liability of $12,500 as of December 31, 2020. For the year ended December 31, 2021, CPSs income before income taxes was $900,000. On July 1, 2021, CPS Transportation issued $600,000 of 9% bonds. The bonds mature in 10 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. Required: 1. Determine CPS Transportations income tax expense and net income for the year ended December 31, 2021. 2. Determine CPS Transportations interest expense for the year ended December 31, 2021. 3. Prepare the long-term liabilities section of CPS Transportation's December 31, 2021, balance sheet.

Determine CPS Transportations income tax expense and net income for the year ended December 31, 2021. (Enter your answers in whole dollars.)

CPS TRANSPORTATION
Income Tax Expense and Net Income
For the Year Ended December 31, 2021
Income before income taxes
Income tax expense:
Current
Deferred
Net income

Determine CPS Transportations interest expense for the year ended December 31, 2021. (Do not round intermediate calculations. Enter your answers in whole dollars.)

CPS TRANSPORTATION
Calculation of Interest Expense
For the Year Ended December 31, 2021
Lease obligation
Bonds payable
Total interest expense

Prepare the long-term liabilities section of CPS Transportation's December 31, 2021, balance sheet. (Do not round intermediate calculations. Enter your answers in whole dollars.)

CPS TRANSPORTATION
Long-Term Liabilities Section of Balance Sheet
December 31, 2021
Long-term liabilities:
Lease liability
Less: current portion
Bonds payable, net
Deferred tax liability
Total long-term liabilities