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 $189,000 (its fair value) and was expected to have a useful life of 12 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 $42.341.) Both (a) the present value of the lease payments and (b) the present value of the residual value (le, the residual asset) are included in the lease receivable because the two amounts combine to allow the lessor to recover its net investment Crescent seeks a 10% return on its lease Investments. By this arrangement, the lease is deemed to be a finance lease to the lessee. (FV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of 51 and PVAD of $.1) (Use appropriate factor(s) from the tables provided.) Required: 1. What will be the effect of the lease on Crescent's earnings for the first year? (gnore taxes) (Enter decreases with negative sign.) 2. What will be the balonces in the balance sheet accounts related to the lease at the end of the first year for Crescent? (Ignore taxes) Answer is complete but not entirely correct. 1. 2 Effect on earnings Lease receivable balance (end of year) 11,250 11,250 $ Each of the three Independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's Implicit rate of return. (FV of $1. PV of $1. FVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Lease term (years) Lesnor'e rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 2 3 12 20 4 118 96 120 120 11 $620,000 $1,000,000 $205,000 100 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. (Round your answers to the nearest whole dollar.) Answer is not complete. Lease Right-of-uso Payments Assot/Lease Payable 60,909 S 185,000 Situation 1 Situation 2 Situation 3