716 points On June 30, 2016, Fly-By-Night Airlines leased a jumbo jet from Boein

Question

716 points On June 30, 2016, 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 $1,300,000 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. (Eyof $1. PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. At what amount should Fly-By-Night record the lease liability on June 30, 2016, assuming that the first payment will be made on June 30, 2017? Table or calculator function: Payment PV- 6/30/2016:

Explanation / Answer

1)

PVA 7%,20 *Payment

10.59401 * 1,300,000

13,772,213

2)

PVAD 7%,20 *Payment

11.33560*,1300,000

14,736,280

Payment 1,300,000 n 20 i 7% PV 30/6/206

PVA 7%,20 *Payment

10.59401 * 1,300,000

13,772,213

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