Larkspur Company leases an automobile with a fair value of $20,991 from Matthew Motors, Inc., on the following terms. 1. Non-cancelable term of 50 months. Rental of $440 per month (at the beginning of each month). (The present value at 0.5% per month is $19,520.) Larkspur guarantees a residual value of $1,330 (the present value at 0.5% per month is $1,036). Larkspur expects the probable residual value to be $1,330 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Larkspur's incremental borrowing rate is 6% a year (0.50% a month). Matthew's implicit rate is unknown. 2. 3. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer has been saved. See score details after the due date. What is the nature of this lease to Larkspur? (b) The nature of this lease is a/an finance List of Accounts lease. Present value of the lease payments $ Attempts: 1 of 1 used What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.)

Larkspur Company leases an automobile with a fair value of $20,991 from Matthew Motors, Inc., on the following terms. 1. Non-cancelable term of 50 months. Rental of $440 per month (at the beginning of each month). (The present value at 0.5% per month is $19,520.) Larkspur guarantees a residual value of $1,330 (the present value at 0.5% per month is $1,036). Larkspur expects the probable residual value to be $1,330 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Larkspur's incremental borrowing rate is 6% a year (0.50% a month). Matthew's implicit rate is unknown. 2. 3. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer has been saved. See score details after the due date. What is the nature of this lease to Larkspur? (b) The nature of this lease is a/an finance List of Accounts lease. Present value of the lease payments $ Attempts: 1 of 1 used What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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