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The long-term liabilities section of CPS Transportation's December 31, 2017, balance sheet included the following:

a.A lease liability with 13 remaining lease payments of $12,000 eash, due annually on January 1:

lease liability $94,845

Less: current portion. 4,412

90,433

The incremental borrowing rate at the inception of the lease was 9% and the lessor's implicit rate, which was known by CPS Transportation, was 8%.

The incremental borrowing rate at the inception of the lease was 9% and the lessor's implicit rate, which was known by CPS Transportation, was 8%. 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, 2017, for $340,000. 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 2018 through 2021 is as follows: Year 2018 2019 2020 2023 MACRS Depreciation $90,000 45,000 35,000 25,000 Straight line Depreciation $68,000 68,000 68,000 68,000 Difference $ 22,000 (23,000) (33,000) (43,000) The enacted federal income tax rates are 35% for 2017 and 40% for 2018 through 2021. For the year ended December 31, 2018. CPS's income before income taxes was $740.000 On July 1. 2018, CPS Transportation issued 5440,000 of 7% 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 8%. CPS records interest at the effective interest rate. Required: 1. Determine CPS Transportation's income tax expense and net income for the vear ended December 31, 2018 The enacted federal income tax rates are 35% for 2017 and 40% for 2018 through 2021. For the year ended Decer income before income taxes was $740,000. On July 1, 2018, CPS Transportation issued $440,000 of 7% bonds. The bonds mature in 10 years and interest is pa 1 and July 1. The bonds were issued at a price to yield the investors 8%. CPS records interest at the effective interes Required: 1. Determine CPS Transportation's income tax expense and net income for the year ended December 31, 2018. 2. Determine CPS Transportation's interest expense for the year ended December 31, 2018. 3. Prepare the long-term liabilities section of CPS Transportation's December 31, 2018, balance sheet. Required 1 Required 2 Required 3 Determine CPS Transportation's income tax expense and net income for the CPS TRANSPORTATION Income Tax Expense and Net Income For the Year Ended December 31, 2018 Income before income taxes Income tax expense: Current Deferred Net income Required Required 1 Required 2 Required 3 Determine CPS Transportation's interest expense for the year ende calculations. Round final answers to the nearest whole dollars.) CPS TRANSPORTATION Calculation of Interest Expense For the Year Ended December 31, 2018 Capital lease obligation interest Bond interest payable Total interest expense

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