At January $1,2024.$ Cate Med leased restaurant eq$$tipment from Crescent Corporation under a nine year lease agreement.

The lease agreement specifies annual payments of $$20,000$ beginning lanuary $1,2024,$ 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 $13$ 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 $$72\mathrm{.}098.$

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

By this amangement, the lease is deemed to be an operating lease.

Note: Use tables, Excel, or a financial calculator. $($EV of $$1.$ PV of $$1.$ EVA of $$1.$ PVA ol $$1.$ VVAD ot $$1$ and PVAD of $$1$

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.

$2.$ What wili be the balances in the balance sheet accounts related to the leace at the end of the first year for Cafe Med fignore taves$)?$

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

$\backslash$table$[[1$ Ettect on eamings$],[2$ Lease parable balance $($end of year$)],[2$ Right ol use asset batance $($end of year$)]]$

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$4$ or $5$

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