Exercise 21-03 Marin Company leases an automobile with a fair value of $21,505 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $450 per month (at the beginning of each month). 3. Marin guarantees a residual value of $1,440. Delaney expects the probable residual value to be $1,440 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Marin's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Your answer is correct. What is the nature of this lease to Marin? The nature of this lease is a/an finance lease. What is the present value of the lease payments to determine the lease liability? (Round answer to O decimal places, e.g. 5,275.) Present value of the lease payments 18,842 Based on the original fact pattern, record the lease on Marin's books at the date of commencement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit TRight-of-Use Asset 18,842 Lease Liability 18,842 Record the first month's lease payment (at commencement of the lease). (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit Lease Liability 447.76 Cash 447.76 Record the second month's lease payment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit TLease Liability Interest Expense Cash Record the first month's amortization on Marin's books (assume straight-line). (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.25.) Account Titles and Explanation Debit Credit TAmortization Expense 447.76 T Right-of-Use Asset 447.76 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT X Your answer is incorrect. Try again. Suppose that instead of $1,440, Marin expects the residual value to be only $500 (the guaranteed amount is still $1,440). How does the calculation of the present value of the lease payments change from part (b)? (Round answer to o decimal places, e.g. 5,275.) PV of lease payments