At January 1, 2024, Café 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, 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 $207,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line method. Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $94, 113. Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. Note: 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) Required: What will be the effects of the lease on Crescent's (lessor'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 Crescent ( ignore taxes)? Note: For all requirements, round your intermediate calculations to the nearest whole dollar amount.
At January 1, 2024, Café 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, 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 $207,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line method. Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $94, 113. Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. Note: 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) Required: What will be the effects of the lease on Crescent's (lessor'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 Crescent ( ignore taxes)? Note: For all requirements, round your intermediate calculations to the nearest whole dollar amount.
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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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Transcribed Image Text:At January 1, 2024, Café 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, 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 $207,000 (its fair value) and was expected to have a
useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line
method.
Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term
of $94, 113.
Crescent seeks a 12% return on its lease investments.
By this arrangement, the lease is deemed to be an operating lease.
Note: 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)
Required:
What will be the effects of the lease on Crescent's (lessor'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 Crescent (
ignore taxes)?
Note: For all requirements, round your intermediate calculations to the nearest whole dollar amount.
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