Please assist with answering part B. Show all work!!

Tamarisk Company leases an automobile with a fair value of $19,465 from John Simon Motors, Inc., on the following terms:

1.		Non-cancelable term of 50 months.
2.		Rental of $400 per month (at the beginning of each month). (The present value at 0.5% per month is $17,746.)
3.		Tamarisk guarantees a residual value of $1,720 (the present value at 0.5% per month is $1,340). Delaney expects the probable residual value to be $1,720 at the end of the lease term.
4.		Estimated economic life of the automobile is 60 months.
5.		Tamarisks incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.

Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

(a)

	Your answer is correct.

What is the nature of this lease to Tamarisk?

The nature of this lease is a/an select a nature of the lease

operatingfinance

lease.

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(b)

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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

$enter the Present value of the lease payments in dollars rounded to 0 decimal places

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