ACCT 6011 Assignment #2 Instructions:

Part A:

In the table below, indicate whether the lease for the 3D printer satisfies any of the criteria listed for a capital lease classificati
embedded in the lease is equal to EPL's incremental borrowing rate.

Not
Test Met Not met Determinable
Economic life test X
Recoverability test X
Specialized asset test X
Ownership transfer test X

Part B:

In the table below, indicate the impact on the 3D printer lease classification based on changes in key assumptions

Operating Not
Change in Key Assumptions Lease Capital Lease Determinable

EPL can purchase the lease at the end of the two

years for $50,000, which reflects its expected X
market value.
The implicit rate in the lease is 14% and it is X
known to EPL.
The useful life of the printer is two years. X

Part C:

In the table below, indicate whether each expense item identifed is a temporary difference (taxable or deductible), permanen
between GAAP and the Income Tax Act.

Taxable Deductible
Temporary Temporary Permanent
Expense Item Difference Difference Difference

Lease Expense
Depreciation X
Meals and Entertainment X
Warranty Expense X
 Pension Expense X

Part D:

Calculate the current and deferred tax expense for EPL. Be sure to review the details of the pretax income calculation and the
by the controller to determine temporary and permanent differences.

Accounting Income for the year 2020 $ 1,940,620

50% meals and entertainment expense $ 39,000
Amortization $ 250,000 Tax
$ 2,229,620 Carrying Am
Less: CCA $ 750,000 Less Deductible temporaryDiffer
$ 1,479,620 Tax
Plus: Warranty Expense $ 37,500 Deffered Tax A
Taxable income for the year 2020 $ 1,517,120 Net Deffered Tax Expense
Current Tax expense for the year 2020 (35%) $ 530,992

Part E:

In the table below, indicate where the items would be located on the statement of cash flows assuming that the direct metho

Operating Investing Financing

Depreciation Expense
Tax payments made during the year
Lease Expense X
Gain on disposal of asset
Change in Pension Liability

Part F:

Calculate the pension liability or asset that would be reported on EPL's statement of financial position. Assume that the curre
of the year, that the contributions to the pension fund were made at December 31, 2020 and that there were no payments to

Pension Expense 7500

Minus: Contribution -5000
Liability 2500
ted for a capital lease classification under ASPE. The implicit rate

in key assumptions

axable or deductible), permanent difference, or not a difference

Not a Difference

X
retax income calculation and the additional information provided

Plant and Equipment

Warranty
Tax base $ 4,250,000
Carrying Amount $ 4,750,000 $ 37,500
Less Deductible temporaryDifference -$ 500,000 $ 37,500
Tax base 35% 35%
Deffered Tax Assets -$ 175,000 $ 13,125
Deffered Tax Expense -$ 161,875

assuming that the direct method is used for operating activities.

Not presented

X
X

X
X

position. Assume that the current service cost is credited at end

that there were no payments to retirees (first year of operations).