Kingbird Company leases an automobile with a fair value of $20,275 from John Simon Motors, Inc., on the following terms:

1.		Non-cancelable term of 50 months.
2.		Rental of $430 per month (at the beginning of each month). (The present value at 0.5% per month is $19,077.)
3.		Kingbird guarantees a residual value of $1,030 (the present value at 0.5% per month is $803). Kingbird expects the probable residual value to be $1,030 at the end of the lease term.
4.		Estimated economic life of the automobile is 60 months.
5.		Kingbirds incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.

What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.)

Present value of the lease payments

b- Journal entry :