Please help with the following questions: Exercise 21-2 Flint Company leases an
ID: 2544463 • Letter: P
Question
Please help with the following questions:
Exercise 21-2 Flint Company leases an automobile with a fair value of $9,828 from John Simon Motors, Inc., on the following terms: oncancelable term of 50 months 2. Rental of $220 per month (at end of each month). (The present value at 196 per month is $8,624.) 3. Estimated residual value after 50 months is $1,010. (The present value at 1% per month is $614.) Flint Company guarantees the residual value of $1,010. 4. Estimated economic life of the automobile is 60 months. 5. Flint Company's incremental borrowing rate is 12% a year (196 a month). Simon's implicit rate is unknown. What is the present value of the minimum lease payments? The present value of the minimum lease payments (c) Record the lease on Flint Company's books at the date of inception. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (d) Record the first month's depreciation on Flint Company's books (assume straight-line). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round ansvers to 0 decimal places, e.g. 15.) Account Titles and Explanation Debit Credit lfno entry s equired, se ect wo Entin, forthe account (e Record the first month s lease payment. Credit account titles are automatica y no ented when amount is entered. Do not indent manua titles and enter O for the amounts. Round answers to 0 decimal places, e.g. 15.) Account Titles and Explanation Debit CreditExplanation / Answer
a. The present value of minimum lease payment Present value of minimum rental payment $ 8,624.00 Present value of guaranteed residual value $ 614.00 Present value of minimum lease payment $ 9,238.00 ($8,624-614) c. Account title and explanation Debit Credit Lease Equipment $ 9,238.00 Lease liability $ 9,238.00 (To record lease at its inception) d. Depreciation Expense $ 164.56 (($9,238-1,010)/50 months) Accumulated depreciation $ 164.56 (To record first month depreciation) e. Lease liability $ 127.62 ($220-92.38) Interest expense $ 92.38 ($9,238*1%) Cash $ 220.00 (To record first payment)