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On January 1 , 2 0 2 4 , Gem Finder leased mining equipment from Emerald Corporation under a nine - year lease agreement. The
On January Gem Finder leased mining equipment from Emerald Corporation under a nineyear lease agreement. The lease agreement specifies annual payments of $ beginning January the beginning of the lease, and at each December thereafter through The equipment was acquired recently by Emerald at a cost of $its fair value and was expected to have a useful life of years with no salvage value at the end of its life. Because the lease term is only years, the asset does have an expected residual value at the end of the lease term of $ Both a the present value of the lease payments and b the present value of the residual value ie the residual asset are included in the lease receivable because the two amounts combine to allow the lessor to recover its net investment. Emerald seeks a return on its lease investments. By this arrangement, the lease is deemed to be a finance lease.
What will be the effect of the lease on Emeralds earnings for the first year ignore taxes
What will be the balances in the balance sheet accounts related to the lease at the end of the first year for Emerald ignore taxes
Effect on earnings:
Lease Recievable balance End of year:
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