er $15$ Homework $($i$)$

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 Jafuary $1,2024,$ the beginning of the lease, and on each December $31$ thereafter through $2031.$

The equipment was acquired recently by Crescent at a cost of $$171,000($its fair value$)$ 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 $$4,666.$

Crescent seeks a $8\%$ return on its lease investments.

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By this arrangement, the lease is deemed to be a finance lease.

Hint

Note: Use tobles, Excel, or a financial colculator. $($FV of $$1,$ PV of $$1.$ FVA of $$1,$ PVA of $$1.$ PVAD of $$1$ and PVAD of $$1)$

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Reterences

Required:

What will be the effect of the lease on Cafe Med's 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 Cafe Med $($ignore taxes$)?$

Note: For all requirements, round your intermediate calculations and final answers to the nearest whole dollars.

Eflect on earnings

MC