What will be the effect of the lease on Crescent earnings

Assignment Help Financial Accounting
Reference no: EM132850708

Question - At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $22,000 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 $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 $117,029.) Both (a) the present value of the lease payments and (b) the present value of the residual value (i.e., the residual asset) are included in the lease receivable because the two amounts combine to allow the lessor to recover its net investment. Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease to the lessee.

Required - What will be the effect of the lease on Crescent's earnings for the first year?

Reference no: EM132850708

Questions Cloud

What is the unit product cost using absorption costing : Total fixed selling and administrative costs, $8,120. There are no beginning inventories. What is the unit product cost using absorption costing
Create balanced energy budget : Analysis of Electrical Power systems and create balanced energy budget - Examine the demands, sources and construction of electrical power generation
Explain the steps involved in patients using medication : Explain the steps involved in patients using medication and identify factors that contribute to medication errors. How can as nurses make medication use safer?
Find the z-score corresponding to 25 pounds of garbage : Each month an American household generates an average of 28 pounds of newspaper for garbage with a standard deviation of 2 pounds.
What will be the effect of the lease on Crescent earnings : By this arrangement, the lease is deemed to be a finance lease to the lessee. What will be the effect of the lease on Crescent's earnings for the first year
Make a draft of porter five forces analysis : Make a draft of Porter's Five Forces analysis for banana export company
How met essential first during the bsn program : How does a solid base in liberal education provide the cornerstone for the practice and education of nurses? how you met Essential I during the BSN program
What is the probability that a randomly selected employee : What is the probability that a randomly selected employee from Firm A will have a monthly income which is greater than $2044.84515 (approximately)?
How much did Bassett have in cash at December : Bassett, Inc. went into business on Oct. 1, 2020. Following are Bassett's transactions during 2020: How much did Bassett have in cash at December

Reviews

Write a Review

Financial Accounting Questions & Answers

  Prepare the company direct materials budget

Prepare the company's direct materials budget. The company expects to start the first quarter with 1,620 units in finished goods inventory.

  What are the basics of valuation including intrinsic value

What are the basics of valuation including intrinsic value, discounting and payoffs. Explain and estimate the cost of equity capital.

  What would it cost to replace personal property

What would it cost an insurance company to replace a family's personal property that originally cost $18,000? The replacement costs for the items have increased 15 percent

  Replacing control device-what is the initial net investment

Cranberry Manufacturing Company is considering an asset replacement project of replacing a control device. This old control device has been fully depreciated but can be sold for $4,000. The new control device, which is more automated, will cost $22,0..

  Calculate the internal rate of return for each product

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% ea..

  What amount should the company credit to share premium

On April 17, 2017, The company's Board of Directors declared, What amount should the company credit to share premium for this stock dividend?

  Which option should mrs heffernan go with

A monthly payment of $2000 for 25 years period. If Mrs. Heffernan appropriate discount rate is 6%. Which option should Mrs. Heffernan go with?

  What is the annual payment necessary

The projected cost of the stadium in 2014 dollars is $7.5 million. What is the annual payment necessary to meet this projected cost of the stadium

  Product-tradition-performance technique and equipment

Is there something in your life that is typically considered credible (product, tradition, performance technique, equipment, etc.) that you believe needs to be critically challenged? What and why?

  Calculate the gross pay amount

Vicky Le, an employee of Sweet Shoppe Industries, receives a bonus of $4,000 for her stellar work. Calculate the gross pay amount

  What basic accounting principle caused kaiser aluminum

What basic accounting principle caused Kaiser Aluminum to record this $19.4 million pretax charge? Briefly describe the rationale for this principle.

  How much is the current service cost

How much is the current service cost? Increase in present value of defined benefit obligation during the year due to changes in actuarial assumptions 40,000

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd