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Splish Company leases an automobile with a fair value of $15,755 from John Simon Motors, Inc., on the following terms: 1. Noncancelable term of 50
Splish Company leases an automobile with a fair value of $15,755 from John Simon Motors, Inc., on the following terms:
1. | Noncancelable term of 50 months. | |
2. | Rental of $360 per month (at end of each month). (The present value at 1% per month is $14,111.) | |
3. | Estimated residual value after 50 months is $1,150. (The present value at 1% per month is $699.) Splish Company guarantees the residual value of $1,150. | |
4. | Estimated economic life of the automobile is 60 months. | |
5. | Splish Companys incremental borrowing rate is 12% a year (1% a month). Simons implicit rate is unknown. |
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