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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
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
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