Shuttle Master Airlines has leased an aircraft from Streamline 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. How would Shuttle Master Airlines record the acquisition of the aircraft? The effective rate of interest is 9%
a. The company would not record the aircraft as an asset but would record rent expense of $1,000,000 per year for 18 years.
b. The company would not record the aircraft as an asset but would record rent expense of $900,000 per year for 20 years.
c. The aircraft would be recorded as an asset with a cost of $8,756,000.
d. The aircraft would be recorded as an asset with a cost of $9,129,000.
c
You might also like to view...
Describe a scenario that shows why a company may want to avoid "destroying" a close competitor
What will be an ideal response?
When the buyer breaches a sales contract, if the difference between the contract price and the market price will not place the seller in as good a position as performance would have, then the seller may recover the lost profit
a. True b. False Indicate whether the statement is true or false
Which of the following types of risks best meets the requirements for being insurable by private insurers?
A) most market risks B) property risks C) financial risks D) political risks
If debt is to be used to finance a project, then when cash flows for a project are estimated, interest payments should be included in the analysis.
Answer the following statement true (T) or false (F)