At January 1, 2021, Caf Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $27,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $198,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $46,826.) Crescent seeks a 9% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (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.) Required: 1. What will be the effect of the lease on Caf Meds earnings for the first year (ignore taxes)? (Enter decreases with negative sign.) 2. What will be the balances in the balance sheet accounts related to the lease at the end of the first year for Caf Med (ignore taxes)? (For all requirements, round your intermediate calculations and final answers to the nearest whole dollar.)

TABLE 5 Future Value of an Annuity Due of $1 FVAD = (1+1) x (1 + i) 5.5% 11.09 1 100 1.0300 2.0909 11100 6.05 L.0600 2.16 4.5 1.0450 21170 3.222 12.0% 1.1200 23744 2 21080 1.54 2.5% 10100 10150 10200 10250 20301 2045220604 20756 3.0604 3.0909 3.1216 3.1525 41010 4.1523 42040 42563 5.1520 52196 5.3081 5.3877 2301 3.5% 1.0350 1.0400 2.1062 2.1216 3.21493.2465 4.3625 44163 5.55 5.6330 7.09 10700 2.2109 3.4399 4.7507 6.1533 10800 2.3164 3.5061 4856 21535 3:3101 45356 5.8019 10.0% 1.1000 2.3100 3.6410 5.1051 6.7156 3 20.09 1.2000 2.6400 4.3650 6.4416 3.1836 1.0900 2.2781 3.5731 49847 6.5233 4 3.3423 45801 58881 43091 3.3746 4.6371 5.9759 52278 69129 3.7793 53528 7.1152 5 5.4654 5.7369 6.3359 9.1420 79338 8.30 9.90 95366 100 6.2138 63330 64343 6.5474 0.0035 6.7794 6.8983 7 72857 74328 75830 77361 7.8923 8.0517 8.214 8 8.365 8.5593 8.7546 89545 9.1591 9.3635 9.5823 9 9.4632 9.7027 99497 102034 10.4699 107314 11.0061 10 10.5668 10.8633 11.1687 114835 11.8078 12. 1420 12.4564 10.000 11 5779 13.2008 2009 87215 102563 118754 13.5835 8.8975 9.2598 10.4913 10.9730 12.6154 13.9736 147636 8.4892 10.4359 12.5795 14.9974 17.5312 12.0210 14. 1929 16.5603 108594 13.1640 15.7220 18.5614 11.2997 13.7757 16 5487 19.6546 11.95 15.4991 19.7989 24.9587 31.1504 13.4866 15.5455 12.8412 14460 201331 110823 12.0413 12.4121 12.7956 13.1930 13.6620 14.0258 12 12.3093 13 2368 13.6803 141404 146178 15.1130 15.6368 13 13.9474 14.4504 14.973915519016.0863 16.6770 17.2919 14 150909 156021 1694 169319 17.5959 13.2957 19.02.16 IS 16.2579 16.9324 11.6393183802 19.1569 19.970 20.6245 161599 12.95 149111 16.7130 18.5986 205730 22.6575 153856 172865 19.2925 21.7132 25 2116 15.860916.858 17.8621 19.1405 20.0151 21.5505 12.2750 24.1290 34.6725 26.53 199771 20.4953 23.2149 19.1407 21.9534 25.0192 47.4966 58.1959 23.5227 26.9750 30.7725 34.997 270091 31.3926 162797 41.7533 19.7541 21.7153 214087 23 6411 26.1511 293243 201509 32.0034 31.4054 38.1999 710151 36.4421 23.7402 25.9964 39.5447 43.500 475837 164.9306 24.5414 27 1124 16 17.4304 18.2014 19.0121198647 20.7616 21.7050 22.6975 17 18 6147 19.49420412121.3361224144 33.4997 24.6454 13 19.8109 20.7967 21.3406 229460 24.1169 35.3572 26.6712 19 21019022 1237 21.3974245447 35.8704 27.2797287781 20 22.2392 23.470524.7833 26 1833 27.6765 29.2695 30.9652 27.2129 15.9057 22.7630 5992 35.9737 0.1013 45.0185 50 1601 49 1959 559395 29.400 32.7502 12.990 364502 36.3790 40.13 447530 43.855 49.4219 127 1167 153.700 29.5150 31 1027 25.555 28.053 30.114 32.7831 50.1591 547497 62.4397 710524 80.6587 157850 61 3035 56.2750 63.0025 165.00 234,0256 34.7153 367861 33.9927 55.755 71 2651 88 21 23.4716 248376 26.2990 27.8629 29.5368 31.3259 33.3456 35.3004 37.5052 39.8643 42.3923 48.0057 54.4563 61.8T 70.4027 80.2145 91.9026 27.0307 35255356305140126709350117 375510 111 11.3117 40.5 50 1115 513000 58155467.6755 789544 52 1240 TON 1818 1.26 08 149.3339 30 35.1327 38.1018 413794 45 0003 19.0027 53.4295 59.3283 63.7534 69.7608 764194 83.2017 01.0730 122.3459 145.5752 180.9434 220.9132 270.2926 1418.2579 1049.3752 55 001961 610069057677661137.5095 90.5365 111.5 126 158144118915104T3 211.699 279.7510162919 4863513 0459 359 1424 8126204 1. Effect on earnings 2. Lease payable balance (end of year) Right-of-use asset balance (end of year) TABLE 2 Present Value of $1 $1 PV = (1+1) 1.04 1.596 2.596 3.5% 5.09 5.596 6096 7,096 100% 11.09 12.09 20.096 1 099010 098522 0.98039 0.975610.97087 0.96618 096154 0.95694 095238 0.94787 0.94340 0.93458 0.92593 091743 0.90909090090 0.89286 0.83333 20.98030 097066 096117 0.95181 0.94260 093351 0.92456 091573 0.90703 089845 0.89000 0.87344 0.85734 0.84168 0.82645 0.81162 0.79719 069444 3 0.97059 0.95632 0.94232 0.92860 0.91514 0.90194 083900 0.87630 086384 085161 0.83962 0.81630 0.79383 0.77218 0.75131 0.73119 0.71178 0.57870 + 0.96098 094218 0.92385 0.90595 0.58849 087144 0.85480 0.83856 0.82270 0.80722 0.79209 0.76290 0.73503 0.70343 0.68301 0.65873 0.63552 048225 5 0.95147 0.92826 0.90573 0.88385 0.86261 0.84197 082193 080245 0.78353 0.76513 0.74726 0.71299 0.63058 0.64993 0.62092 0.59345 0.56743 040188 . 0.94305 0.91454 0.88797 0.86330 0.83748 0.81350 0.79031 0.76790 0.74637 4.73535 6.70096 0.6664 0.68017 0.5962 0.56417 0.53464 0.56665 0.33490 7 093272 090103 0.87056 0.84127 0.81309 0.78599 0.75992 0.73483 0.71068 0.68744 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.27908 8 0.92348 0.88771 0.8549 0.82075 0.78941 0.75941 0.73069 0.70319 0.67684 0.65160 0.62741 0.58301 0.54027 0.50187 0.46651 0.43393 0.40388 0.23257 90.91434 0.87459 0.83676 0.80073 076642 0.73373 0.70259 067290 064461 061763 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 036061 0.19381 10 0.90529 0.86167 0.82035 0.78120 0.74409 0.70892 067556 0.64393 0.61391 0.58543 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.16151 11 089632 0.34893 0.80426 0.76214 0.72242 0.65495 0.64958 0.61620 _58468 55491 0.52679 0.47509 0.43553 0.38753 0.35049 0.31728 0.38748 0.13459 12 0.38745 0.33619 0.78549 0.74356 0.70138 066178 0.62460 0.58966 0.55654 0.52595 0.49097 0.44401 0_39711 0.35553 0.31863 0.28584 0.25668 0.11216 13 087866 082403 0.77303 0.72542 0.68095 0.63940 0.50057 0.56427 0.53032 0.49856 0.46554 0.41496 0.36770 0.32615 0.25966 0.25751 0.22917 0.09346 14 0.36996 0.31155 0.75758 0.70773 0.66112 0.61778 0.5774 0.53997 0.5OSOT 0.47257 0.44230 0.38752 0.34046 0.29925 0.26333 0.23199 0.20462 0.07789 15 036135 0.79955 0.74301 0.69047 0.54186 0.59689 0.55526 0.51672 0.48102 0.44793 0.41727 0.36345 0.31524 0.27454 0.29999 0.20900 0.13270 006491 16 085282 078903 6.72545 0.67362 0.62317 0.57671 0.53391 0.45447 0.45811 0.43458 0.39365 0.33873 0.29189 0.25187 0.21763 0.15829 0.16312 0.05409 17 034438 0.77639 0.71416 0.65720 0.002 0.55720 0.51337 0.47318 0.43630 0.40245 0.37136 0.31657 0_27027 0.23107 0.19734 0.16963 0.14564 0.04507 15 03:3602 0.76491 070016 0.64117 0.58739 0.53836 049363 0.45280 0.41552 0.38147 0.35034 0.29556 0.25025 0.21199 0.17986 0.15282 0.13004 0.01756 19 0.82774 0.75361 0.68643 0.62553 0.57029 0.52016 0.47464 0.43330 0.39573 0.36155 0.33051 0.27651 0.23171 0.19449 0.16351 0.13768 0.11611 0.03130 20 031954 0.74247 0.67297 0.61027 0.55368 0.50257 0.45639 0.41464 0.337699 0.34273 031150 0.25342 0.21455 0.17343 0.14364 0.12403 0.10367 0.02005 21 0.81143 0.731.50 0.65973 0.59539 0.53755 0.45557 0.43883 0.39679 0235894 032456 0.29416 0.24151 0.19566 0.16370 0.13513 0.11174 0.09256 0.02174 24 0.78757 0.69954 0.62172 0.55288 0.49193 0.43796 0.39012 0.34770 031007 0.27666 0.24098 0.19715 0.15770 0.12640 0.10153 0.08170 0.06588 0.01258 25 0.77977 0.68921 0.60953 0.53939 0.47761 0.42315 0.37512 0.33273 0.29530 0.26223 0.233000.18425 0.14602 0.11597 0.09230 0.07361 0.05882 0.01048 28 0.75684 0.65910 0.57437 0.50088 0.43708 038165 0.33348 029157 025509 0.22332 0.19563 0.15040 0.11591 0.08955 0.06934 0.05382 0.04187 0.00607 >> 0.74934 0.64936 0.56311 0.48366 0.43435 036875 0.32065 0.279020_24295 0.21168 0.18456 0.14056 0.10733 0.08215 0.06304 0.04349 0.03738 0.00506 30 0.74192 0.63976 0.55207 0.47674 0.41199 035638 0.30832 0.26700023138 0.20064 0.17411 0.13137 0.69938 0.07537 0.05731 0.04368 0.03338 0.00421 31 0.73458 0.61031 0.54125 0.46511 0.39999 0.34423 0.29646 0.25550 0.22036 0.19018 0.16425 0.12277 0.09202 0.06915 0.05210 0.03935 0.02900 0.00351 40 0.67165 0.55126 0.45289 037243 030656 0.25257 0.20819 0.17193 0.14205 0.11746 0.09722 0.06678 0.04603 0.03184 0.02209 0.01538 0.01075 0.00068