Brecker Company leases an automobile with a fair value of $10,906 from Emporia Motors, Inc., on the following terms.

1.		Noncancelable term of 50 months.
2.		Rental of $250 per month (at end of each month). (The present value at 1% per month is $9,800.)
3.		Estimated residual value after 50 months is $1,180. (The present value at 1% per month is $715.) Brecker Company guarantees the residual value of $1,180.
4.		Estimated economic life of the automobile is 60 months.
5.		Brecker Company