Kingbird Company leases an automobile with a fair value of $15,671 from John Simon Motors, Inc., on the following terms:

1.		Non-cancelable term of 50 months.
2.		Rental of $320 per month (at the beginning of each month).
3.		Kingbird guarantees a residual value of $1,500. Delaney expects the probable residual value to be $1,500 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? The nature of this lease is a/an select a nature of the lease operating or finance lease?

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

$

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.)

Account Titles and Explanation	Debit	Credit

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.)

Account Titles and Explanation	Debit	Credit

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.)

Account Titles and Explanation	Debit	Credit

Record the first months amortization on Kingbirds books (assume straight-line). (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.25.)

Account Titles and Explanation	Debit	Credit