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At January 1,2021, Caf Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

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Accounting

At January 1,2021, 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 1,2021, the beginning of the lease, and at each December 31 thereafter through 2028. 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 13 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 an operating lease. (EV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tables provided.)
1. Effect on earnings
2a. Lease Payable balance (end of year)
2b. Right of use asset balance (end of year)

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