Lancia Company leases an automobile with a fair value of $13,627 from Vauxhall Motors, Inc., on the following terms:

1). Noncancelable term of 50 months.

2). Rental of $320 per month (at end of each month). (The present value at 1% per month is $12,543.)

3). Estimated residual value after 50 months is $1,110. (The present value at 1% per month is $675.) Lancia Company guarantees the residual value of $1,110.

4). Estimated economic life of the automobile is 60 months.

5). Lancia Companys incremental borrowing rate is 12% a year (1% a month). Vauxhalls implicit rate is unknown.

a. What is the present value of the minimum lease payments?

b. Journalize the lease on Lancia Companys books at the date of inception.

c. Journalize the first months depreciation on Lancia Companys books (assume straight-line).

d. Journalize the first months lease payment.