On June 30, 2018, Fly-By-Night Airlines leased a jumbo jet from Boeing Corporation. The terms of the
Question:
On June 30, 2018, 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, 2018, assuming that the first payment will be made on June 30, 2019?
2. At what amount should Fly-By-Night record the lease liability on June 30, 2018, before any payments are made, assuming that the first payment will be made on June 30, 2018?
Step by Step Answer:
Requirement 1 PVA 400000 1059401 4237604 Liabili...View the full answer
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
Related Video
The time value of money (TVM) is the concept that the money you have in your pocket today is worth more than the same amount would be if you received it in the future because of the profit it can earn during the interim.
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