Splish Brothers Company leases an automobile with a fair value of $13,924 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $280 per month (at the beginning of each month). (The present value at 0.5% per month is $12,422.) 3. 4. 5. Splish Brothers guarantees a residual value of $1.580 (the present value at 0.5% per month is $1.231). Splish Brothers expects the probable residual value to be $1.580 at the end of the lease term. Estimated economic life of the automobile is 60 months. Splish Brothers's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown.