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.