Larkspur Company leases an automobile with a fair value of $10,844 from John Simon Motors, Inc., on the following terms:

1.		Non-cancelable term of 50 months.
2.		Rental of $220 per month (at the beginning of each month). (The present value at 0.5% per month is $9,760.)
3.		Larkspur guarantees a residual value of $1,120 (the present value at 0.5% per month is $873). Delaney expects the probable residual value to be $1,120 at the end of the lease term.
4.		Estimated economic life of the automobile is 60 months.
5.		Larkspurs incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.

A. 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.)

B. Record the first months amortization on Larkspurs 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.)

C. Suppose that instead of $1,120, Larkspur expects the residual value to be only $500 (the guaranteed amount is still $1,120). 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.)