Teal Mountain Company leases an automobile with a fair value of $15,005 from John Simon Motors, Inc., on the following terms: Non-cancelable term of 50 months.. Rental of $300 per month (at the beginning of each month). (The present value at 0.5% per month is $13,310.) Teal Mountain guarantees a residual value of $1,800 (the present value at 0.5% per month is $1.403). Teal Mountain expects the probable residual value to be $1,800 at the end of the lease term. Estimated economic life of the automobile is 60 months. Teal Mountain's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. 1. 2₁ 3. 4. 5. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Teal Mountain Company leases an automobile with a fair value of $15,005 from John Simon Motors, Inc., on the following terms: Non-cancelable term of 50 months.. Rental of $300 per month (at the beginning of each month). (The present value at 0.5% per month is $13,310.) Teal Mountain guarantees a residual value of $1,800 (the present value at 0.5% per month is $1.403). Teal Mountain expects the probable residual value to be $1,800 at the end of the lease term. Estimated economic life of the automobile is 60 months. Teal Mountain's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. 1. 2₁ 3. 4. 5. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Teal Mountain Company leases an automobile with a fair value of $15,005 from John Simon Motors, Inc., on the following terms:
Non-cancelable term of 50 months.
Rental of $300 per month (at the beginning of each month). (The present value at 0.5% per month is $13,310.)
Teal Mountain guarantees a residual value of $1,800 (the present value at 0.5% per month is $1,403). Teal Mountain expects
the probable residual value to be $1,800 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.
1.
2₁
3.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor t
(a)
Your answer is correct.
What is the nature of this lease to Teal Mountain?
The nature of this lease is a/an finance
lease.
e provided.)
Transcribed Image Text:(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 O decimal places, e.g. 5,275.)
Account Titles and Explanation
Debit
Credit
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