Southern Airlines has leased an aircraft from BAL Aircraft Company. The annual payments are $1,000,000, and the
Question:
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:
1. Would Southern Aircraft record the lease as an operating or capital lease? Why?
2. Provide the journal entry to record the acquisition.
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1 The lease would be classified as a capital lease because the lease term makes up greater tha...View the full answer
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Related Book For 
Cornerstones of Financial and Managerial Accounting
ISBN: 978-0324787351
1st Edition
Authors: Rich Jones, Mowen, Hansen, Heitger
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