Pat Delaney Company leases an automoble with a fair value of $8725 from John Simon Motors, Inc.on the following terms:1. Nonconcealable term of 50 months.2. Rental of $200 per month (at the end of each month). (The present value at 1% per month is $7840).3. Estimated residual value after 50 months is $1180 (The present value at 1% per month is $715). Delaney Company guarantees the residual value of $1180.4. Estimated economic life of the automobile is 60 months.5. Delaney Company's incremental borrowing rate is 12% ayear (1% a month). Simon's implicit rate is unknown.Questions:a) What is the present value of the minimum lease payments?b) Record the lease on Delaney Company's book at the date of inception.c) Record the first month's depreciation on Delaney Company's books (Assume straight-line).d) Record the first month's lease payment 12:43 @ATTENDANCE QUE...ATTENDANCE QUESTIONPlease solve it and submit to me before 9:00 p.m. Today. So that I will mark your attendance.Question-1 Aqua Company leases an automobile with a fair value of Rs.8,725 from ToyotaMotors, Inc., on the following terms:1. Noncancelable term of 50 months.2. Rental of Rs.200 per month (at end of each month). (The present value at 1% per month isRs.7,840.)3. Estimated residual value after 50 months is Rs.1,180. (The present value at 1% per month isRs.715.) Aqua Company guarantees the residual value of Rs.1,180.4. Estimated economic life of the automobile is 60 months.5. Aqua Company's incremental borrowing rate is 12% a year (1% a month). Toyota's implicit rateis unknown. INSTRUCTIONS(a) What is the nature of this lease to Aqua Company?(b) What is the present value of the minimum lease payments?(c) Record the lease on Aqua Company's books at the date of inception.(d) Record the first month's depreciation on Aqua Company's books (assume straight-line).(e) Record the first month's lease payment.II

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Pat Delaney Company leases an automoble with a fair value of $8725 from John Simon Motors, Inc.on the following terms:

1. Nonconcealable term of 50 months.

2. Rental of $200 per month (at the end of each month). (The present value at 1% per month is $7840).

3. Estimated residual value after 50 months is $1180 (The present value at 1% per month is $715). Delaney Company guarantees the residual value of $1180.

4. Estimated economic life of the automobile is 60 months.

5. Delaney Company's incremental borrowing rate is 12% ayear (1% a month). Simon's implicit rate is unknown.

Questions:

a) What is the present value of the minimum lease payments?

b) Record the lease on Delaney Company's book at the date of inception.

c) Record the first month's depreciation on Delaney Company's books (Assume straight-line).

d) Record the first month's lease payment

12:43 @
ATTENDANCE QUE...
ATTENDANCE QUESTION
Please solve it and submit to me before 9:00 p.m. Today. So that I will mark your attendance.
Question-1 Aqua Company leases an automobile with a fair value of Rs.8,725 from Toyota
Motors, Inc., on the following terms:
1. Noncancelable term of 50 months.
2. Rental of Rs.200 per month (at end of each month). (The present value at 1% per month is
Rs.7,840.)
3. Estimated residual value after 50 months is Rs.1,180. (The present value at 1% per month is
Rs.715.) Aqua Company guarantees the residual value of Rs.1,180.
4. Estimated economic life of the automobile is 60 months.
5. Aqua Company's incremental borrowing rate is 12% a year (1% a month). Toyota's implicit rate
is unknown. INSTRUCTIONS
(a) What is the nature of this lease to Aqua Company?
(b) What is the present value of the minimum lease payments?
(c) Record the lease on Aqua Company's books at the date of inception.
(d) Record the first month's depreciation on Aqua Company's books (assume straight-line).
(e) Record the first month's lease payment.
II

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