05 Jun Question Exercise 21-2 Pat Delaney Company leases an auto
Question
Exercise 21-2
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 Companys incremental borrowing rate is 12% a year (1% a month). Simons implicit
rate is unknown.
What is the present value of the minimum lease payments?
The present value of the minimum lease payments
$
Show List of Accounts
Link to Text
(c) Record the lease on Delaney Companys books at the date of inception. (Credit account
titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and
Explanation
Debit
Credit
(d) Record the first months depreciation on Delaney Companys books (assume straight-line).
(Credit account titles are automatically indented when amount is entered. Do not
indent manually. Round answers to 0 decimal places, e.g. 15.)
Account Titles and
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