If you were a manager of United Airlines, and the airlines is in need of an airplane, would you choose to purchase a plane made by Boeing, lease it as financial leases, or lease it as an operating lease, or lease it in a short term (less than 1 year) lease? Why?

If you were a manager of United Airlines, and the airlines is in need of an airplane, would you choose to purchase a plane made by Boeing, lease it as financial leases, or lease it as an operating lease, or lease it in a short term (less than 1 year) lease? Why?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2DQ: A company could sell a building for 250,000 or lease it for 2,500 per month. What would need to be...

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A lease is an agreement in which the lessor conveys the right to use an asset for an agreed period of time to the lessee in return for a payment or series of payments (IAS 17.4). Because of rapid changes in technologies, most of the production companies involve in the lease contracts rather than of purchasing new machineries. Being the accounting specialization student, how will you support this? Explain any three advantages of this contract with suitable examples.
Airway Leasing entered into an agreement to lease aircraft to Ouachita Airlines. Consider each of the following, a–e, to be independent scenarios. a. The agreement calls for ownership of the aircraft to be transferred to Ouachita Airlines at the end of the lease term. b. The fair value of the aircraft is expected to be $500,000 at the end of the lease term. Ouachita has the option to purchase the aircraft at the end of the lease term for $90,000. c. The aircraft has a useful life of 20 years, and the term of the lease is 14 years. d. The present value of the lease payments is $8,900,000 and the fair value of the leased aircraft is $10,000,000. e. The aircraft was manufactured to meet specifications provided by Ouachita to optimize the exclusively regional nature of its flights. Required: 1. In each scenario, indicate whether Ouachita would classify the lease as an operating lease or capital lease under U.S. GAAP. Assume the lease agreement has not met any of the other criteria of a…
Lewis’s management has been considering moving to a new downtown location, and they are concerned that these plans may come to fruition prior to the equipment lease’s expiration. If the move occurs then Lewis would buy or lease an entirely new set of equipment, so management would like to include a cancelation clause in the lease contract. What effect would such a clause have on the riskiness of the lease from Lewis’s standpoint? From the lessor’s standpoint? If you were the lessor, would you insist on changing any of the other lease terms if a cancelation clause were added? Should the cancelation clause contain provisions similar to call premiums or any restrictive covenants and/or penalties of the type contained in bond indentures? Explain your answer.
A salesperson is selling a leased commercial property. what will happen to the lease after the sale is consummated ? A. the lease is assigned to the new owner ? b. the mease expires and the tenanr must move.? c . the tenant and the new owner must negatiate a new lease ? d. the new owner has the option of canceling the lease or accepting the lease .
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