Kingbird Company leases an automobile with a fair value of $10,297 from John Simon Motors, Inc., on the following terms:

1.		Non-cancelable term of 50 months.
2.		Rental of $210 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.)
3.		Kingbird guarantees a residual value of $1,000 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,000 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 nature of this lease to Kingbird?

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

Based on the original fact pattern, record the lease on Kingbirds books at the date of commencement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Record the first months 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.)

Record the second months lease payment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

Record the first months amortization on Kingbirds books (assume straight-line).

Suppose that instead of $1,000, Kingbird expects the residual value to be only $500 (the guaranteed amount is still $1,000). How does the calculation of the present value of the lease payments change from part (b)? (Round answer to 0 decimal places, e.g. 5,275.)