At January 1, 2024, Caf Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement.

• The lease agreement specifies annual payments of $32,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031.
• The equipment was acquired recently by Crescent at a cost of $243,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line method.
• Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $73,596.
• Crescent seeks a 9% return on its lease investments.

By this arrangement, the lease is deemed to be an operating lease.

Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Note: For all requirements, round your intermediate calculations to the nearest whole dollar amount. \begin{tabular}{|l|rr|} \hline \multicolumn{3}{|c|}{ Answer is complete but not entirely correct. } \\ \hline 1. Effect on earnings & $ & (39,175) \\ \hline 2. Equipment balance (net, end of year) & $ & 224,308 \\ \hline 2. Deferred lease revenue & $ & 15,886 \\ \hline \end{tabular}