Exercise 21-2 Pearl 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.) Pearl Company guarantees the residual value of $1,130.
4.	Estimated economic life of the automobile is 60 months.
5.	Pearl Companys incremental borrowing rate is 12% a year (1% a month). Simons implicit rate is unknown.

What is the present value of the minimum lease payments?

The present value of the minimum lease payments

$ 14014

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(c) Record the lease on Pearl Companys 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 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Lease Receivable

(d) Record the first months depreciation on Pearl Companys books (assume straight-line). (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 0 for the amounts. Round answers to 0 decimal places, e.g. 15.)

Account Titles and Explanation	Debit	Credit

(e) Record the first months lease payment. (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 0 for the amounts. Round answers to 0 decimal places, e.g. 15.)

Account Titles and Explanation	Debit	Credit