Exercise 21-03 Skysong Company leases an automobile with a fair value of $13,568 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $270 per month (at the beginning of each month). 3. Skysong guarantees a residual value of $1,700. Delaney expects the probable residual value to be $1,700 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Skysong'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 Skysong? The nature of this lease is a/an finance lease. SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Your answer is incorrect. Try again. 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 13303 EUTER Your answer is partially correct. Try again. Based on the original fact pattern, record the lease on Skysong's books at the date of commencement. (Credit account sites are automatically Indented when amount is entered. Do no indent manually.) Account Titles and Explanation Debit Credit Leased Equipment 13303 Lease Liability 13303 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Your answer is correct. Record the first month's tease payment (et commencement of the lease). (Credit account sites are automatically indented when amount is entered. Do not indent marunty Round answers to decimal places, e.. 5,275.) Account Tities and Explanation Credit Debit Lease Uability 270 Cash 270 SHOW LIST OF ACCOUNTS Your answer is partially correct. Try again. Record the second month's lease payment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to decimal places 5,275.) Account Titles and Explanation Debit Credit Interest Expense 67 Lease Liability 203 Cash 270 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Record the first month's amortization on Skysong's books (assume straight-line). (Credit account totes are automatically indented when amount is entered. Do not inden manually mound answers to 2 decimal places, e.g. 5,275.25.) Account Titles and Explanation Credit Debt Amortization Expense 221.72 Lease Expense 221.72 Your answer is correct. Suppose that instead of $1,700, Skysong expects the residual value to be only $500 (the guaranteed amount is still $1,700). 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 12913 Click If you would like to show Work for this question: Geen Show Work
