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King Cones leased ice cream-making equipment from Ace Leasing. Ace ears interest under such arrangements at a 6% annual rate. The lease term is six-months with monthly payments of $11,000 due at the end of each month. King Cones elected the short-term lease option What is the effect of the lease on King Cones earnings during the six-month term (ignore taxes)?
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Answer #1

Decrease in earnings = $66,000

King Cone’s earnings will be reduced by the $11,000 per month lease expense, $66,000($11,000 × 6) for the six month term, ignoring taxes.

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