$TB$ Problem $15-222(Algo)$

$At$ January $1,2021,$ Butterfly, Inc. leased mining equipment from Diamond Corporation under $a$

nine$-$year lease agreement. The lease agreement specifies annual payments $of$ $$81,000$

beginning January $1,2021,$ the beginning $of$ the lease, and $at$ each December $31$ thereafter

through $2028.$ The equipment was acquired recently $by$ Diamond $at$ a cost $of$ $$617,500(its$ fair

value$)$ and was expected $to$ have a useful life $of12$ 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 $of$ $$36,800.)$ Diamond seeks $a8\%$ return $on$ its lease investments. $By$

this arrangement, the lease $is$ deemed $tobe$ a finance lease. $(FVof$ $$1,PVof$ $$1,$ FVA $of$ $$1,$ PVA

$of$ $$1,$ FVAD $of$ $$1$ and PVAD $of$ $$1)(Use$ appropriate factor$(s)$ from the tables provided.$)$

Required:

What will $be$ the effect $of$ the lease $on$ Butterfly's earnings for the first year $(ignore$ taxes$)?$

$(Enter$ decreases with negative numbers. Round your intermediate calculations and final

answers $to$ the nearest whole dollar.$)$

What will $be$ the balances $in$ the balance sheet accounts related $to$ the lease $at$ the end $of$ the

first year for Butterfly $(ignore$ taxes$)?(Round$ your intermediate calculations and final answers

$to$ the nearest whole dollar.$)$