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In: AccountingSplish Company leases an automobile with a fair value of $15,755from John Simon Motors, Inc.,...Splish Company leases an automobile with a fair value of $15,755from John Simon Motors, Inc., on the following terms:1.Noncancelable term of 50 months.2.Rental of $360 per month (at end of each month). (The presentvalue at 1% per month is $14,111.)3.Estimated residual value after 50 months is $1,150. (Thepresent value at 1% per month is $699.) Splish Company guaranteesthe residual value of $1,150.4.Estimated economic life of the automobile is 60 months.5.Splish Company’s incremental borrowing rate is 12% a year (1% amonth). Simon’s implicit rate is unknown.
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