King Cones leased ice cream making equipment from Liang Leasing. Liang earns interest under such arrangements at a 6% annual rate. The lease term is eight months with monthly payments of $10,000 at the end of each month. Liang purchased the equipment having an estimated useful life of four years at a cost of $300,000. Both the lessee and the lessor elected the short term lease option. Amortization is recorded at the end of each month on a straight line basis. Liang depreciates assets monthly on a straight line basis. What is the effect of the lease on King Cones’ earnings during the eight month term, ignoring taxes?
In the situation described in BE 15’30, what is the effect of the lease on Liang Leasing’s earnings during the eight month term, ignoring taxes?