Question

Southwest Airlines provides scheduled air transportation services in the United States. Like many airlines, Southwest leases many of its planes from Boeing Company. In its long-term debt disclosure note included in the financial statements for the year ended December 31, 2008, the company listed $39 million in lease obligations. The note also disclosed that existing leases had a three-year remaining life and that future lease payments averaged approximately $14 million per year.

Required:
1. Determine the effective interest rate the company used to determine the lease liability assuming that lease payments are made at the end of each fiscal year.
2. Repeat requirement 1 assuming that lease payments are made at the beginning of each fiscal year.



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  • CreatedJune 24, 2013
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