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Setup At January 1, 2022, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $30,000 beginning January 1, 2022, the beginning of the lease, and at each December 31 thereafter through 2030. The equipment was acquired recently by Crescent at a cost of $225,000 (its fair value) and was expected to have a useful life 12 years with no salvage value at the end of its life. Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. Summarized Facts A) 9 year least starting 1/1/22 B) Annual payments of $30,000 starting 1/1, and on 12/31 after that C) 12% interest rate D) Lease is an operating lease Extraneous Facts Not Needed Y) Estimated useful life = 12 years...lessee doesn't care, it's an operating lease Z) Acquired for $225,000 = doesn't matter as the lease is classified as an operating lease

Setup At January 1, 2022, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $30,000 beginning January 1, 2022, the beginning of the lease, and at each December 31 thereafter through 2030. The equipment was acquired recently by Crescent at a cost of $225,000 (its fair value) and was expected to have a useful life 12 years with no salvage value at the end of its life. Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. Summarized Facts A) 9 year least starting 1/1/22 B) Annual payments of $30,000 starting 1/1, and on 12/31 after that C) 12% interest rate D) Lease is an operating lease Extraneous Facts Not Needed Y) Estimated useful life = 12 years...lessee doesn't care, it's an operating lease Z) Acquired for $225,000 = doesn't matter as the lease is classified as an operating lease

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Regading the information in the screenshot, pease answer requirements 1-5. Thanks! Requirement #1 Calculate the present value of the lease payments and record the journal entry at lease inception for the lessee. Requirement #2 In the space below, prepare the lease amortization schedule. Requirement #3 Prepare the journal entries the lessee would record on January 1st 2022 and December 31st, 2022 for the first two $30,000 lease payments. Requirement #4 Determine the effect on Café Med's earnings (net income) for the first year (2022)? Requirement #5 Determine the balances relating to the lease (the lease payable & right-of-use asset) on Café Med's balance sheet as of December 31, 2022? 

Setup At January 1, 2022, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $30,000 beginning January 1, 2022, the beginning of the lease, and at each December 31 thereafter through 2030. The equipment was acquired recently by Crescent at a cost of $225,000 (its fair value) and was expected to have a useful life 12 years with no salvage value at the end of its life. Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. Summarized Facts A) 9 year least starting 1/1/22 B) Annual payments of $30,000 starting 1/1, and on 12/31 after that C) 12% interest rate D) Lease is an operating lease Extraneous Facts Not Needed Y) Estimated useful life = 12 years...lessee doesn't care, it's an operating lease Z) Acquired for $225,000 doesn't matter as the lease is classified as an operating lease
Transcribed Image Text:Setup At January 1, 2022, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $30,000 beginning January 1, 2022, the beginning of the lease, and at each December 31 thereafter through 2030. The equipment was acquired recently by Crescent at a cost of $225,000 (its fair value) and was expected to have a useful life 12 years with no salvage value at the end of its life. Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. Summarized Facts A) 9 year least starting 1/1/22 B) Annual payments of $30,000 starting 1/1, and on 12/31 after that C) 12% interest rate D) Lease is an operating lease Extraneous Facts Not Needed Y) Estimated useful life = 12 years...lessee doesn't care, it's an operating lease Z) Acquired for $225,000 doesn't matter as the lease is classified as an operating lease
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