Cutthroat Aviation leased a Boeing 737 Max from Varden Leasing Services on January 1, 2019 in order
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Question:
- Cutthroat Aviation leased a Boeing 737 Max from Varden Leasing Services on January 1, 2019 in order to provide a short-term addition to its capacity. The lease term was 3-years, with annual payments of $4,250,000 due at the beginning of each year. Cutthroat does not know the interest rate implicit in the lease, but its own incremental borrowing rate is 5%. Varden Leasing had recently acquired the airplane from Boeing at a cost of $90 million, and is depreciating it over 30 years.
- Prepare the appropriate JEs for both Cutthroat Aviation and Varden Leasing on January 1, 2019, the beginning of the lease.
- Prepare an amortization schedule that shows the pattern of interest expense for Cutthroat Aviation over the lease term.
- Prepare all appropriate adjusting JEs for both Cutthroat Aviation and Varden Leasing as of December 31, 2019.
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
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