Question - Bryant leased equipment that had a retail cash selling price of $740,000 and a useful life of five years with no residual value. The lessor paid $600,000 to acquire the equipment and used an implicit rate of 7% when calculating annual lease payments of $168,672 beginning January 1, the beginning of the lease. Lease payments will be made January 1 each year of the lease. Incremental costs of consummating the lease transaction incurred by the lessor were $22,000.
What is the effect of the lease on the lessor's earnings during the first year (ignore taxes)?