Delaney Company leases an automobile with a fair value of $10,000 from Simon Motors, Inc. on the following terms:

1.	Non-cancellable term of 50 months.
2.	Rental of $200 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.)
3.	Delaney guarantees a residual value of $1,180 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,180 at the end of the lease term.
4.	Estimated economic life of the automobile is 60 months.
5.	Delaney's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown.

Required:

(a) What is the nature of this lease to Delaney?

(b) What is the present value of the lease payments to determine the lease liability?

(d) Record the first month's lease payment (at commencement of the lease).

(e) Record the second month's lease payment.

d) Record the third month's lease payment.