E21.3 (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. 1. Non-cancelable 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 C1,180 (the present value at 0.5% per month is 920). Delaney expects the probable residual value to be C1,180 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. Instructions 1. What is the present value of the lease payments to determine the lease liability? 2. Record the lease on Delaney's books at the date of commencement. 3. Record the first month's lease payment (at commencement of the lease). 4. Record the second month's lease payment. 5. Record the first month's depreciation on Delaney's books (assume straight-line). 6. Suppose that instead of 1,180, Delaney expects the residual value to be only 500 (the guaranteed amount is still C1,180). How does the calculation of the present value of the lease payments change from part (b)?