Question: Southern Airlines has leased an aircraft from BAL Aircraft Company

Southern Airlines has leased an aircraft from BAL Aircraft Company. The annual payments are $1,000,000, and the life of the lease is 18 years. It is estimated that the useful life of the aircraft is 20 years. The present value of the future lease payments is $8,755,630.

Required:
Would Southern Airlines record the lease as an operating or capital lease? Why?

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  • CreatedSeptember 22, 2015
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