Question

Exercise 21-2 Sheridan Company leases an automobile with a fair value of $18,494 from John Simon Motors, Inc., on the following terms: 1. Noncancelable term of 50 months. 2. Rental of $420 per month (at end of each month). (The present value at 1% per month is $16,463.) 3. Estimated residual value after 50 months is $1,210. (The present value at 1% per month is $736.) Sheridan Company guarantees the residual value of $1,210. 4. Estimated economic life of the automobile is 60 months. 5. Sheridan Company's incremental borrowing rate is 12% a year (1% a month). Simon's implicit rate is unknown. Your answer is correct. What is the present value of the minimum lease payments? The present value of the minimum lease payments 17199 SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TΟ ΤΕXT Your answer is partially correct. Try again (c) Record the lease on Sheridan Company's books at the date of inception. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Leased Equipment 17199 Lease Liability 17199

Answer 1

Answer:

(d) Record's the first month depreciation.

Account Titles and Explanation	Debit ($)	Credit ($)
Depreciation expense	$320*
Accumulated depreciation		$320*

*(17199-1210/50)

(e) Record the first's month lease payment

Account Titles and Explanation	Debit ($)	Credit ($)
Lease Liability	$248
Interest Expense (17199*1%)	$172
Cash		$420
(Being Lease payment recorded)