The lease agreement specifies annual payments of $26,000 beginning January 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 $189,000 (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 $27,160. Crescent seeks a 8% return on its lease investments. his arrangement, the lease is deemed to be a finance lease. : Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) uired: 1. What will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. 2. What will be the balances in the balance sheet accounts related to the lease at the end of the first year for Café Med (ignore taxes)? e: For all requirements, round your intermediate calculations and final answers to the nearest whole dollars. Effect on earnings ease payable balance (end of year)

The lease agreement specifies annual payments of $26,000 beginning January 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 $189,000 (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 $27,160. Crescent seeks a 8% return on its lease investments. his arrangement, the lease is deemed to be a finance lease. : Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) uired: 1. What will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. 2. What will be the balances in the balance sheet accounts related to the lease at the end of the first year for Café Med (ignore taxes)? e: For all requirements, round your intermediate calculations and final answers to the nearest whole dollars. Effect on earnings ease payable balance (end of year)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cc.85.
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