( e ) Record the first month ’ s lease payment . =================================================== ACC 537 Week 5 Assignment Securities www . acc537study . com
Instructions Record the transactions listed above in journal entry form .
E21-2 ( Lessee Computations and Entries ; Capital Lease with Guaranteed Residual Value ) Pat Delaney Company leases an automobile with a fair value of $ 8,725 from John Simon Motors , Inc ., on the following terms :
1 . Noncancelable term of 50 months .
2 . Rental of $ 200 per month ( at end of each month ). ( The present value at 1 % per month is $ 7,840 .) 3 . Estimated residual value after 50 months is $ 1,180 . ( The present value at 1 % per month is $ 715 .) Delaney Company guarantees the residual value of $ 1,180.4 . Estimated economic life of the automobile is 60 months . 5 . Delaney Company ’ s incremental borrowing rate is 12 % a year ( 1 % a month ). Simon ’ s implicit rate is unknown . Instructions
( a ) What is the nature of this lease to Delaney Company ? ( b ) What is the present value of the minimum lease payments ?
( c ) Record the lease on Delaney Company ’ s books at the date of inception .
( d ) Record the first month ’ s depreciation on Delaney Company ’ s books ( assume straight-line ).
( e ) Record the first month ’ s lease payment . =================================================== ACC 537 Week 5 Assignment Securities www . acc537study . com