On January 1, 2021, Cafe 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, 2021. the beginning of the lease, and at each December 31 the after through 2028. the equipment was acquired recently by Crescent at a cost $ 171,000 ( its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. ( Because the lease is only 9 years, the asset does have an expected residual value at the end of the lease term of $ 4,666). Crescent seeks an 8% return on its lease investments. By this arrangement. the lease is deemed to be an operating lease.

What is the

Effect on earnings

Lease payable balance (end of year)

Right-of-use asset balance (end of year)