1 answer

You can find all the tables online The long-term liabilities section of CPS Transportation's December 31,...

Question:

The long-term liabilities section of CPS Transportations December 31, 2020, balance sheet included the following: (FV of $1,The enacted federal income tax rates are 20% for 2020 and 25% for 2021 through 2024. CPS had a deferred tax liability of $16,Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine CPS TransportatRequired 1 Required 2 Required 3 Prepare the long-term liabilities section of CPS Transportations December 31, 2021, balance

you can find all the tables online

The long-term liabilities section of CPS Transportation's 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 $24,000 each, due annually on January 1: Lease liability Less: current portion $182,546 5,745 $176, 801 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, 2020, for $420,000. 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 2021 through 2024 is as follows: Year 2021 MACRS Depreciation $120,000 60,000 50,000 40,000 Straight-line Depreciation $ 84,000 84,000 84,000 84,000 2022 2023 2024 Difference $ 36,000 (24,000) (34,000) (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 $16,500 as of December 31, 2020. For the year ended December 31, 2021, CPS's income before income taxes was $820,000. On July 1, 2021, CPS Transportation issued $520,000 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.
The enacted federal income tax rates are 20% for 2020 and 25% for 2021 through 2024. CPS had a deferred tax liability of $16,500 as of December 31, 2020. For the year ended December 31, 2021, CPS's income before income taxes was $820,000. On July 1, 2021, CPS Transportation issued $520,000 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 Transportation's income tax expense and net income for the year ended December 31, 2021. 2. Determine CPS Transportation's 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine CPS Transportation's 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
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine CPS Transportation's 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
Required 1 Required 2 Required 3 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

Answers

Part 1

CPS Transportation

INCOME TAX EXPENSE AND NET INCOME

For the Year Ended December 31, 2021

Income before income taxes

820000

Income tax expense:

Current (25% x [$820,000 – 36,000])

196000

Deferred

9000

205000

Net income

$615000

Reversal of temporary differences from depreciation giving rise to future taxable amounts:

2022

(24000)

2023

(34000)

2024

(44000)

(102000)

Effective tax rate for years 2022 through 2024

25%

Deferred tax liability, Dec. 31, 2021

(25500)

Less:

Dec. 31, 2020 deferred tax liability:

Temporary difference-depreciation

2021

36000

2022

(24000)

2023

(34000)

2024

(44000)

(66000)

Effective tax rate for years 2021 through 2024

25%

(16500)

Increase (credit) needed

(9000)

           

Part 2

CPS Transportation

Calculation of Interest Expense

For the Year Ended December 31, 2021

Lease obligation (176801*10%)

17680

Bonds payable (475389*10%*1/2)

23769

Total interest expense

$41449

Bond price = (520000*0.14205)+((520000*9%/2)*17.15909) = 73866+401523 = $475389

Present value of an ordinary annuity of $1: n=40, i=5% is 17.15909

present value of $1: n=40, i=5% is 0.14205

Part 3

CPS Transportation

LONG-TERM LIABILITIES SECTION OF BALANCE SHEET

December 31, 2021

Long-term liabilities:

Lease liability – 15 payments of $24,000 due annually on January 1

176801

Less: current portion ($24,000 – 17680)

(6320)

170481

9% bonds payable due June 30, 2039, less unamortized discount of $44242

475758

Deferred income tax liability

25500

Total long-term liabilities

$834265

Unamortized discount = (520000-475389)-((5%*475389)-(4.5%*520000)) = 44242

.

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