Answer:
$11,750
$189,750
Explanation:
1: Calculation for the effect of the lease on Café Med's earnings for the first year
Based on the information given we were told that the lease agreement has annual payments of the amount $29,000 which means that Corporation will recognized a rental revenue of the amount $29,000 each year
Now let Compute for the depreciation to be charged on equipment using this formula
Annual depreciation = Cost of equipment / Useful life
Let plug in the formula
Annual depreciation= $207,000 / 12
Annual depreciation= $17,250
Second step is to Compute for Crescent Effect on earnings using this formula
Crescent Effect on earnings = Rental revenue - Depreciation expense
Let plug in the formula
Crescent Effect on earnings= $29,000 - $17,250
Crescent Effect on earnings= $11,750
2. Calculation for the balances in the balance sheet accounts
Using this formula
Equipment balance at the end of 2021 = Cost - Accumulated depreciation
Let plug in the formula
Equipment balance (net) at the end of 2021= $207, 000 - $17, 250
Equipment balance (net) at the end of 2021= $189,750
Deferred lease revenue will be the Rental amounts that was received in advance on 31. DEC.2021 for 2019 year = $29,000
