Sage Hill Company leases an automobile with a fair value of $17,274 from John Simon Motors, Inc., on the following terms: Non-cancelable term of 50 months. 1. 2. Rental of $360 per month (at the beginning of each month). (The present value at 0.5% per month is $15,971.) 3. Sage Hill guarantees a residual value of $1,240 (the present value at 0.5% per month is $966). Sage Hill expects the probable residual value to be $1,240 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Sage Hill's incremental borrowing rate is 6% a year (0.5% a month). Simon's 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 Sage Hill? (b) The nature of this lease is a/an finance lease. eTextbook and Media List of Accounts Attempts: 1 of 3 used Your Answer Correct Answer (Used) 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 $ 15,971 (c) (d) Your answer is correct. Based on the original fact pattern, record the lease on Sage Hill's books at the date of commencement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Right-of-Use Asset Lease Llability eTextbook and Media List of Accounts Your answer is correct. Debit 15971 Credit 15971 Attempts: 1 of 3 used Record the first month's lease payment (at commencement of the lease). (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 Lease Llability Cash eTextbook and Media List of Accounts Debit 360 Credit 360 Attempts: 1 of 3 used (e) (f) Your answer is correct. 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 Interest Expense Lease Liability Cash eTextbook and Media List of Accounts Your answer is partially correct. Debit 78 282 Credit 360 Attempts: 2 of 3 used Record the first month's amortization on Sage Hill'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 Amortization Expense Right-of-Use Asset eTextbook and Media Debit 15950 Credit 15950 (g) * Your answer is incorrect. Suppose that instead of $1,240, Sage Hill expects the residual value to be only $500 (the guaranteed amount is still $1,240). How does the calculation of the present value of the lease payments change from part (b)? (Round answer to O decimal places, e.g. 5,275.) PV of lease payments eTextbook and Media List of Accounts $ 1240