Exercise 21-2

Monty Company leases an automobile with a fair value of $14,156 from John Simon Motors, Inc., on the following terms:

1.		Noncancelable term of 50 months.
2.		Rental of $340 per month (at end of each month). (The present value at 1% per month is $13,327.)
3.		Estimated residual value after 50 months is $1,130. (The present value at 1% per month is $687.) Monty Company guarantees the residual value of $1,130.
4.		Estimated economic life of the automobile is 60 months.
5.		Monty Companys incremental borrowing rate is 12% a year (1% a month). Simons implicit rate is unknown.

Exercise 21-2 Monty Company lesses an automobile with feir value of $14,156 fro John Simon Motors, Inc" on the following terms; 1. Noncancelable term of 50 months 2. Rantal of S340 per month (at nd of each month). (The present valua at 1% per month is $13,327.) 3. Estimated rasidual valua after 50 months is S 1,130. (The present valua at 1% par month i; S687.) Monty Company guarantees tha residual value of S1, 130. 4. Estimated aconomic life of the automobile i 60 months. 5, Monty Company's incremental borrowing rate is 12% a year (196 a month). Simon's implic t rate is unknown. What is the present value of the minimum lease payments? The present value of the minimum lease payments 4,014 00 (c) Record the lease on Monty Company's books at the date of inception. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Tides and Explanation Dabit Credit Lisbnty (d) Record the first manths depreciation an Monty Company's books (assume straight-line). (Credit account tities are automatically indented wwhen amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titlcs and enter O for the anmounts. Round answers to 0 decimal places, e.g. 15.) Account Titles and Explanation Debit Credit Expense () Record the first month's lease payment. (Credit account titles aro automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts. Round answers to 0 decimal places, eg. 15.) Account Tides and Explanation Dabit Credit Liebiity Activate Windows Go to Settings to activate Windows