(Answered) Problem - pina company leases an automobile with a fair

Accounting

Problem - Pina Company leases an automobile with a fair value of $16,738 from John Simon Motors, Inc., on the following terms:

1. Noncancelable term of 50 months.

2. Rental of $400 per month (at end of each month). (The present value at 1% per month is $15,679.)

3. Estimated residual value after 50 months is $1,190. (The present value at 1% per month is $724.) Pina Company guarantees the residual value of $1,190.

4. Estimated economic life of the automobile is 60 months.

5. Pina Company's incremental borrowing rate is 12% a year (1% a month). Simon's implicit rate is unknown.

(a) What is the present value of the minimum lease payments?

(b) Record the lease on Pina Company's books at the date of inception.

(d) Record the first month's lease payment.

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