At January 1, 2024, Caf Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 $25,000 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 $180,000 (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 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 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: 1. What will be the effect of the lease on Caf Med's earnings for the first year (ignore taxes)? Note: 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)? Note: For all requirements, round your intermediate calculations and final answers to the nearest whole dollars. 1. Effect on earnings $ (57,176) 2. Lease payable balance (end of year) $ 121,710 2. Right-of-use asset balance (end of year) $ 146,710 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 $25,000 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 $180,000 (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 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 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: 1. What will be the effect of the lease on Caf Med's earnings for the first year (ignore taxes)? Note: 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)? Note: For all requirements, round your intermediate calculations and final answers to the nearest whole dollars. 1. Effect on earnings $ (57,176) 2. Lease payable balance (end of year) $ 121,710 2. Right-of-use asset balance (end of year) $ 146,710
Expert Answer:
Answer rating: 100% (QA)
Answer Caf Med Lease Analysis 1 Effect on Earnings for the First Year Ignore Taxes Decreased by Leas... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Draw an operation strategy for a supermarket business. Hint: Make reasonable assumption where necessary. Such assumptions must be clearly stated.
-
CPC Inc., a C corporation with accumulated earnings and profits, elected to be an S corporation four years ago. In the current tax year, gross receipts total $200,000, which included $80,000 of...
-
2,4,4,5,5,5,6,6,6,6,6,7,7,7,8,8,10 What is the variable of interest? What is the level of measurement of the variable
-
Name the five levels of the Capability Maturity Model.
-
Use the extended bottleneck model to solve problem 19.3 with the following number of parts in the system: (a) N = 5 parts, (b) N = 8 parts, and (c) N = 12 parts. Also determine the manufacturing lead...
-
Why shouldnt revenue be recognized until the transaction price can be definitely determined?
-
describe the zone of indifference and its meaning to organizational trust,
-
Chapman Company issued $400,000 of 20-year, 6 percent bonds on January 1, 2013. The bonds were issued at face value. Interest is payable in cash on December 31 of each year. Chapman immediately...
-
Andretti Company has a single product called a Dak. The company normally produces and sells 8 2 , 0 0 0 Daks each year at a selling price of $ 5 8 per unit. The company s unit costs at this level of...
-
Brenda Last is the personnel director at the Burlingham Textile Company. The companys plant is expanding, and Brenda must fill five new supervisory positions in carding, spinning, weaving,...
-
10. A grillage of 3 beams is used to span an opening 3L by 2L as shown in Fig. 10. The second moment of area of the longer beam is 3 times that of the shorter beams. For the loading shown, (a)...
-
What is the business value of blockchain? What six areas of business value have been identified in this chapter?
-
What are the characteristics and the limits of the IPSASBs approach to consolidation?
-
What are the alternative approaches to the IPSAS?
-
What types of traditional and extended performance audits exist, and what are the differences between the two main types of performance audits?
-
To what extent are general frameworks for management control (such as those of Merchant and Simons) applicable to public sector organizations?
-
Q #1 Q #2 Q #3. Required information [The following information applies to the questions displayed below.] On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed...
-
Which one of the following anhydrous chloride is not obtained on direct heating of its hydrated chloride? (A) BaCl2 (B) CaClz (C) MgCl2 (D) SrCl2
-
Define a business transaction in the broad sense and give examples of the two different kinds of transactions.
-
What two equalities in accounting must be maintained in transaction analysis?
-
What is a T-account? What is its purpose?
Study smarter with the SolutionInn App