Exercise 21A3 ag Marin Company leases an automobile with a f

Exercise 21A-3 a-g Marin Company leases an automobile with a fair value of $11,679 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $230 per month (at the beginning of each month)·(The present value at 0.5% per month is $10,204.) 3. Marin guarantees a residual value of $1,600 (the present value at 0.5% per month is $1,247). Delaney expects the probable residual value to be $1,600 at the end of the lease term. Estimated economic life of the automobile is 60 months. Marin\'s incremental borrowing rate is 6% a year (0.5% a month), Simon\'s implicit rate is unknown. 4. 5. ere (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the nature of this lease to Marin? The nature of this lease is a/an lease What is the present value of the lease payments to determine the lease liability? (Round answer to O decimal places, e.g. 5,275. Present value of the lease payments s Based on the original fact pattern, record the lease on Marin\'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 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 O decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit

Solution

Requirement 1 The nature of lease is a Capital Lease, since it covers most of the economic life of the asset Lease amortization schedule End of Month Lease Rental Present Value of Lease rents Interest/Finance charge Requirement 2 0 1 230 0 Present Value of Lease Payments is $10204+$1247 = 11451 1 230 0.995025 228.8557 1.144279 2 230 0.990075 227.7171 2.282864 3 230 0.985149 226.5842 3.415785 Date Account Title & Explanation Debit Credit 4 230 0.980248 225.4569 4.54307 Amount in $ Amount in $ 5 230 0.975371 224.3353 5.664746 Requirement 3 Investment in the capital lease 11451 6 230 0.970518 223.2192 6.780842 Asset 11451 7 230 0.96569 222.1086 7.891385 To record the lease on its commencement 8 230 0.960885 221.0036 8.996403 9 230 0.956105 219.9041 10.09592 Requirement 4 Lease rent 230 10 230 0.951348 218.81 11.18997 Investment in the capital lease 230 11 230 0.946615 217.7214 12.27858 To record the first month\'s lease payment 12 230 0.941905 216.6382 13.36177 13 230 0.937219 215.5604 14.43957 Requirement 5 Lease rent 230 14 230 0.932556 214.488 15.51201 Investment in capital lease 228.86 15 230 0.927917 213.4209 16.57912 Finance charge/Interest 1.14 16 230 0.9233 212.3591 17.64091 To record the second month\'s lease payment 17 230 0.918707 211.3026 18.69743 18 230 0.914136 210.2513 19.74868 As per the policy of chegg, we are supposed to answer the maximum of four sub-parts of a question. 19 230 0.909588 209.2053 20.79471 Thank You 20 230 0.905063 208.1645 21.83553 21 230 0.90056 207.1288 22.87118 22 230 0.89608 206.0983 23.90167 23 230 0.891622 205.073 24.92703 24 230 0.887186 204.0527 25.9473 25 230 0.882772 203.0375 26.96248 26 230 0.87838 202.0274 27.97262 27 230 0.87401 201.0223 28.97773 28 230 0.869662 200.0222 29.97784 29 230 0.865335 199.027 30.97298 30 230 0.86103 198.0368 31.96316 31 230 0.856746 197.0516 32.94842 32 230 0.852484 196.0712 33.92878 33 230 0.848242 195.0957 34.90425 34 230 0.844022 194.1251 35.87488 35 230 0.839823 193.1593 36.84068 36 230 0.835645 192.1983 37.80167 37 230 0.831487 191.2421 38.75788 38 230 0.827351 190.2907 39.70933 39 230 0.823235 189.3439 40.65605 40 230 0.819139 188.4019 41.59806 41 230 0.815064 187.4646 42.53539 42 230 0.811009 186.532 43.46804 43 230 0.806974 185.6039 44.39606 44 230 0.802959 184.6805 45.31947 45 230 0.798964 183.7617 46.23828 46 230 0.794989 182.8475 47.15251 47 230 0.791034 181.9378 48.0622 48 230 0.787098 181.0326 48.96737 49 230 0.783182 180.132 49.86803 50 1600 0.779286 1246.858 353.1423 11450.46 1649.537