On December 31 of the first year, a Company signed a five-year lease to take delivery of a new aircraft. The lease requires annual payments of $100,000 per year with the first payment due immediately. Company officials are unsure whether this contract is an operating lease or a finance lease.

Questions to answer

What is reported as liability as of December 31 of year one? explain.

What is reported in the second year in the income statement? explain

Answer rating: 100% (QA)

As of December 31 of the first year the reported liability would depend on whether the lease is classified as an operating lease or a finance lease fo... View the full answer