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What is the nature of the lease to larkspur

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Reference no: EM132599625

Larkspur Company leases an automobile with a fair value of $10,844 from John Simon Motors, Inc., on the following terms:

1. Non-cancelable term of 50 months.

2. Rental of $220 per month (at the beginning of each month).

3. Larkspur guarantees a residual value of $1,120. Delaney expects the probable residual value to be $1,120 at the end of the lease term.

4. Estimated economic life of the automobile is 60 months.5.Larkspur's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown.

Question 1: What is the nature of this lease to Larkspur?

Question 2: What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.)

Question 3: Record the first month's amortization on Larkspur's books (assume straight-line).

Reference no: EM132599625

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