Splish Brothers Company leases an automobile with a fair value of $13,924 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $280 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.) 3. Splish Brothers guarantees a residual value of $1,580 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,580 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Splish Brothers’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Collapse question part (a) What is the nature of this lease to Splish Brothers? The nature of this lease is a/an select a nature of the lease finance lease. Collapse question part (b) What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.) Present value of the lease payments $enter the Present value of the lease payments in dollars rounded to 0 decimal placesEntry field with incorrect ans
Splish Brothers Company leases an automobile with a fair value of $13,924 from John Simon Motors, Inc., on the following terms:
1. Non-cancelable term of 50 months.
2. Rental of $280 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.)
3. Splish Brothers guarantees a residual value of $1,580 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,580 at the end of the lease term.
4. Estimated economic life of the automobile is 60 months.
5. Splish Brothers’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Collapse question part
(a)
What is the nature of this lease to Splish Brothers?
The nature of this lease is a/an select a nature of the lease
finance
lease.
Collapse question part
(b)
What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.)
Present value of the lease payments
$enter the Present value of the lease payments in dollars rounded to 0 decimal placesEntry field with incorrect answer now contains modified data
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