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What is the present value of the minimum lease payments

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Reference no: EM132071523

Question - Pat Delaney Company leases an automobile with a fair value of $10,420 from John Simon Motors, Inc., on the following terms.

1. Noncancelable term of 51 months.

2. Rental of $240 per month (at end of each month). (The present value at 1% per month is $9,552.)

3. Estimated residual value after 51 months is $1,020. (The present value at 1% per month is $614.) Delaney Company guarantees the residual value of $1,020.

4. Estimated economic life of the automobile is 53 months.

5. Delaney Company's incremental borrowing rate is 12% a year (1% a month). Simon's implicit rate is unknown.

What is the present value of the minimum lease payments?

Reference no: EM132071523

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