Question: On June 30 2013 Fly By Night Airlines leased a jumbo jet

On June 30, 2013, Fly-By-Night Airlines leased a jumbo jet from Boeing Corporation. The terms of the lease require Fly-By-Night to make 20 annual payments of $400,000 on each June 30. Generally accepted accounting principles require this lease to be recorded as a liability for the present value of scheduled payments. Assume that a 7% interest rate properly reflects the time value of money in this situation.

Required:
1. At what amount should Fly-By-Night record the lease liability on June 30, 2013, assuming that the first payment will be made on June 30, 2014?
2. At what amount should Fly-By-Night record the lease liability on June 30, 2013, before any payments are made, assuming that the first payment will be made on June 30, 2013?


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  • CreatedDecember 23, 2013
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