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). 3. Larkspur guarantees a residual value of $1,120. 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.

x] Your answer is incorrect. Try again. 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 11,022 Record the second month's lease payment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit Lease Liability Loss on Capital Lease Cash Record the first month's amortization on Larkspur's 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 Lease Revenue 220 220