Sage Hill Company leases an automobile with a fair value of $17,274 from John Simon Motors, Inc., on the following terms:

1.		Non-cancelable term of 50 months.
2.		Rental of $360 per month (at the beginning of each month).
3.		Sage Hill guarantees a residual value of $1,240. Delaney 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 Hills incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.

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

Based on the original fact pattern, record the lease on Sage Hills books at the date of commencement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Record the first months lease payment (at commencement of the lease). (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Record the second months lease payment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Record the first months amortization on Sage Hills 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
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount