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 $25,000 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 $180,000 (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 nine years, the asset does have an expected residual value at the end of the lease term of

$50,995.) Crescent seeks a 10% 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:

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 $25,000 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 $180,000 (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 nine years, the asset does have an expected residual value at the end of the lease term of $50,995.) Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (FV of $1. PV of S1 EVA of $1. PVA of SL EVAD 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 Med's 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.) Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to Cuest 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 $25,000 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 $180,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its We Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $50.995) Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease (FV of $1. PV of St PVA 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 Cafe Med's 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) Answer is complete but not entirely correct. 1. 2 Effect on earnings Lease payable balance (end of year) Right-of-use asset balance (end of year) $ 5 $ 30.934) 2.500 140.776