Sage Hill AG leases an automobile with a fair value of 23,171 from Simon Motors,...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Sage Hill AG leases an automobile with a fair value of 23,171 from Simon Motors, on the following terms. 1. Non-cancelable term of 50 months. 2. Rental of 500 per month (at the beginning of each month). (The present value at 0.5% per month is 22,182.) 3. Sage Hill guarantees a residual value of 1,190 (the present value at 0.5% per month is 538 ). Sage Hill expects the probable residual value to be 1,190 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Sage Hill's incremental borrowing rate is 6% a year ( 0.5% a month). Simon's implicit rate is unknown. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.) Present value of the lease payments
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Sage Hill AG leases an automobile with a fair value of 23,171 from Simon Motors, on the following terms. 1. Non-cancelable term of 50 months. 2. Rental of 500 per month (at the beginning of each month). (The present value at 0.5% per month is 22,182.) 3. Sage Hill guarantees a residual value of 1,190 (the present value at 0.5% per month is 538 ). Sage Hill expects the probable residual value to be 1,190 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Sage Hill's incremental borrowing rate is 6% a year ( 0.5% a month). Simon's implicit rate is unknown. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.) Present value of the lease payments 