( 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