Record the first month amortization on Teal Mountain books

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Reference no: EM133060166

Question - Teal Mountain Company leases an automobile with a fair value of $15,005 from John Simon Motors, Inc., on the following terms:

1. Non-cancelable term of 50 months.

2. Rental of $300 per month (at the beginning of each month). (The present value at 0.5% per month is $13,310.)

3. Teal Mountain guarantees a residual value of $1,800 (the present value at 0.5% per month is $1,403). Teal Mountain expects the probable residual value to be $1,800 at the end of the lease term.

4. Estimated economic life of the automobile is 60 months.

5. Teal Mountain's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown.

Record the first month's amortization on Teal Mountain's books (assume straight-line).

Reference no: EM133060166

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