Kingbird Company leases an automobile with a fair value of $20,275 from John Simon Motors,...
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Kingbird Company leases an automobile with a fair value of $20,275 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $430 per month (at the beginning of each month). (The present value at 0.5% per month is $19,077.) 3. Kingbird guarantees a residual value of $1,030 (the present value at 0.5% per month is $803). Kingbird expects the probable residual value to be $1,030 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Kingbirds incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.
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