Kingbird Company leases an automobile with a fair value of $20,275 from John Simon Motors, Inc., on the following terms:

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Kingbird Company Leases An Automobile With A Fair Value Of 20 275 From John Simon Motors Inc On The Following Terms 1 (57.01 KiB) Viewed 52 times

Kingbird Company leases an automobile with a fair value of $20,275 from John Simon Motors, Inc., on the following terms: 1. 2. 3. Non-cancelable term of 50 months. Rental of $430 per month (at the beginning of each month). (The present value at 0.5% per month is $19,077.) Kingbird guarantees a residual value of $1,030 (the present value at 0.5% per month is $803). Kingbird expects the probable residual value to be $1,030 at the end of the lease term. Estimated economic life of the automobile is 60 months. Kingbird's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. 4. 5. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) What is the nature of this lease to Kingbird? The nature of this lease is a/an lease. e Textbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (b). What is the present value of the lease payments to determine the lease liability? (Round answer to decimal places, eg. 5,275.) Present value of the lease payments $
) (c) Based on the original fact pattern, record the lease on Kingbird's books at the date of commencement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (d) Record the first month's lease payment (at commencement of the lease). (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer
(e) Record the second month's lease payment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to decimal places, eg. 5,275.) Account Titles and Explanation Debit Credit eTextbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (f) Record the first month's amortization on Kingbird's books (assume straight-line). (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.25.) Account Titles and Explanation Debit Credit eTextbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer g (g) Suppose that instead of $1,030, Kingbird expects the residual value to be only $500 (the guaranteed amount is still $1,030). How does the calculation of the present value of the lease payments change from part (b)? (Round answer to decimal places, eg. 5,275.) PV of lease payments