Short Answer 
To analyze Crescent’s lease effects in the first year, the total expenses comprise an interest expense of $13,606 and a depreciation expense of $16,498, totaling $30,104. By the year’s end, the carrying amount of the equipment is $181,502, accumulated depreciation is $16,498, and the lease liability is $158,830.
Step 1: Calculate Earnings Expenses
To determine the effects of the lease on Crescent’s earnings for the first year, calculate interest expense and depreciation expense. The interest expense is derived from the carrying amount of the equipment ($151,174) multiplied by the interest rate (9%), resulting in $13,606. The depreciation expense is calculated as the cost of the equipment ($198,000) minus the residual value ($46,826), divided by the lease term (9 years), yielding $16,498. Thus, the total expenses come to $30,104.
Step 2: Assess Balance Sheet Accounts
At the end of the first year, it’s essential to determine the balance sheet accounts related to the lease: carrying amount of equipment, accumulated depreciation, and lease liability. The carrying amount is the initial equipment cost minus the depreciation expense ($198,000 – $16,498), resulting in $181,502. The accumulated depreciation is $16,498, representing the depreciation for that year.
Step 3: Calculate Lease Liability
The lease liability at the end of the first year reflects the present value of the remaining lease payments. This is calculated using the annual payments of $27,000 for 8 years, discounted at the 9% interest rate. By utilizing a present value annuity factor table or a financial calculator, you find the present value of these future lease payments to be $158,830. Therefore, the final balances are: Carrying Amount: $181,502, Accumulated Depreciation: $16,498, and Lease Liability: $158,830.