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Tamarisk Company leases an automobile with a fair value of $19, 465 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of
Tamarisk Company leases an automobile with a fair value of $19, 465 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $400 per month (at the beginning of each month). (The present value at 0.5% per month is $17, 746.) 3. Tamarisk guarantees a residual value of $1, 720 (the present value at 0.5% per month is $1, 340). Delaney expects the probable residual value to be $1, 720 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Tamarisk's incremental borrowing rate is 6% a year (0.5% a month), Simon's implicit rate is unknown. (For calculation purposes, use 5 decimal places as displayed in the factor table provided) What is the nature of this lease to Tamarisk? The nature of this lease is a/an lease. 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 Tamarisk's books at the date of commencement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Record the first month's 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.)
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