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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 $29,000
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 $29,000 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 $216,000 (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 $76,131.
- Crescent seeks a 10% return on its lease investments.
By this arrangement, the lease is deemed to be a finance lease.
Note: 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)
Required:
What will be the effect of the lease on Caf Meds earnings for the first year (ignore taxes)?
Note: Enter decreases with negative sign.
- 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)?
Note: For all requirements, round your intermediate calculations and final answers to the nearest whole dollars.
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