Assume that on January 1, 2014, Trans Global Airlines leases two used Boeing 737s from Aircraft Lessors
Question:
Required:
1. Should Trans Global account for the lease as a capital or an operating lease? Why?
2. Based on your answer to requirement 1, make all journal entries that Trans Global would make related to the lease for 2014, 2015, 2016, and 2017. Round all amounts to the nearest dollar.
3. Assume that Trans Global accounts for the lease using whichever method (capital or operating) that you did not select in requirement 1. Make all journal entries related to the lease for 2014, 2015, 2016, and 2017.
4. Prepare a schedule of the year-to-year and total (before-tax) income differences that would result from accounting for the lease as a capital lease versus an operating lease. Round all amounts to the nearest dollar.
5. Why might Trans Global’s managers prefer the lease to be accounted for as an operating
lease rather than as a capital lease?
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Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
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