E$21\mathrm{.}3($LO $2)($Lessee Computations and Entries, Lease with Guaranteed Residual Value$)$ Delaney AG leases an automobile with a fair value of $10,000$ from Simon Motors, on the following terms.

Non$-$cancelable term of $50$ months.

Rental of $200$ per month $($at the beginning of each month$).($The present value at $0\mathrm{.}5\%$ per month is $8,873.)$

Delaney guarantees a residual value of $1,18$ o $($the present value at $0\mathrm{.}5\%$ per month is $920).$ Delaney expects the probable residual value to be $1,180$ at the end of the lease term.

Estimated economic life of the automobile is $60$ months.

Delaney's incremental borrowing rate is $6\%$ a year $(0\mathrm{.}5\%$ a month$).$ Simon's implicit rate is unknown.

Instructions

a$.$ What is the present value of the lease payments to determine the lease liability?

b$.$ Record the lease on Delaney's books at the date of commencement.

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

d$.$ Record the second month's lease payment.

e$.$ Record the first month's depreciation on Delaney's books $($assume straightline$).$

f$.$ Suppose that instead of $1,180,$ Delaney expects the residual value to be only ${}_{500}($the guaranteed amount is still $1,180).$ How does the calculation of the present value of the lease payments change from part $($b$)?$