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Splish Brothers Company leases an automobile with a fair value of $18,767 from John Simon...

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Accounting

Splish Brothers Company leases an automobile with a fair value of $18,767 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $390 per month (at the beginning of each month). (The present value at 0.5% per month is $17,302.) 3. Splish Brothers guarantees a residual value of $1,410 (the present value at 0.5% per month is $1,099). Delaney expects the probable residual value to be $1,410 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Splish Brotherss incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.

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