eal Mountain Company leases an automobile with a fair value of $20,014 from John Simon Motors, Inc., on the following terms: 1.   Non-cancelable term of 50 months. 2.   Rental of $410 per month (at the beginning of each month). (The present value at 0.5% per month is $18,190.) 3.   Teal Mountain guarantees a residual value of $1,840 (the present value at 0.5% per month is $1,434). Teal Mountain expects the probable residual value to be $1,840 at the end of the lease term. 4.   Estimated economic life of the automobile is 60 months. 5.   Teal Mountain’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown.   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 0 decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Teal Mountain Company leases an automobile with a fair value of $20,014 from John Simon Motors, Inc., on the following terms:

1.   Non-cancelable term of 50 months.
2.   Rental of $410 per month (at the beginning of each month). (The present value at 0.5% per month is $18,190.)
3.   Teal Mountain guarantees a residual value of $1,840 (the present value at 0.5% per month is $1,434). Teal Mountain expects the probable residual value to be $1,840 at the end of the lease term.
4.   Estimated economic life of the automobile is 60 months.
5.   Teal Mountain’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown.
 
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 0 decimal places, e.g. 5,275.)

Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
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