Metlock Company leases an automobile with a fair value of $16,767 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $350 per month (at the beginning of each month). (The present value at 0.5% per month is $15,528.) 3. Metlock guarantees a residual value of $1,170 (the present value at 0.5% per month is $912). Metlock expects the probable residual value to be $1,170 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Metlocks incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.

Based on the original fact pattern, record the lease on Metlocks books at the date of commencement.

Record the first months lease payment (at commencement of the lease).

Record the second months lease payment.

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

Suppose that instead of $1,170, Metlock expects the residual value to be only $500 (the guaranteed amount is still $1,170). How does the calculation of the present value of the lease payments change from part (b)?