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?
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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?
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- Part ILynbrook, Inc. is considering leasing a CAT Scan machine for its operations. As the Controller of Lynbrook, you have been asked to provide management with the lease information related to the CAT Scan. Lynbrook is considering leasing the machine from Capital Leasing, who in turn purchased the machine from the manufacturer, ScanHouse Corp. for $1,000,000. Required:Round your answers to the nearest whole dollar amounts.1. How should this lease be classified by Lynbrook and by Capital Leasing?2. Prepare appropriate entries for both Lynbrook and Capital Leasing from the beginning of the lease through the second rental payment on April 1, 2020. Depreciation and amortization are recorded at the end of each fiscal year (December 31).3. Assume Lynbrook leased the machine directly from the manufacturer, ScanHouse Corp., which produced the machine at a cost of $800,000. Prepare appropriate entries for ScanHouse from the beginning of the lease through the second rental payment on April 1,…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 .Able Equipment entered into an arrangement to provide M. T. Bin Wholesale’s data center with Able’s newest server model. Due to security processes in place for its customer data, M. T. Bin requires access to the equipment and the ability to direct its use. Able can replace or reconfigure the equipment if Able finds it’s financially advantageous to do so. Does the contract contain a lease?
- The lessor would most likely prefer a ________ or ________ lease to an operating lease. Nonoperating lease treatment would permit a financial service company lessor to remove heavy machinery and equipment, jet airlines, oceangoing vessels, and such from its balance sheet and replace it with the ________, a financial asset compatible with the nature of its business. In addition, the nonoperating lease results in the recognition of ________, rather than ________ revenue. Group of answer choices standalone; operating; fair value of the leased asset; interest income; rent direct financing; operating; net investment in the lease; financing income; unearned standalone price; sales-type; fair value of the leased asset; financing income; unearned direct financing; sales-type; net investment in the lease; interest income; rentTo consider the financial statement effects of leasing versus purchasing an asset, review the following case of Hack Wellington Company Hack Wellington Company needs equipment that will cost the company $560. Hack Wellington Company is considering to either purchase the equipment by borrowing $560 from a local bank or leasing the equipment. Assume that the lease will be structured as an operating lease. Some data from Hack Wellington Company's current balance sheet prior to the lease or purchase of the equipment are: Balance Sheet Data (Dollars) Current assets $2,940 Debt $1,680 Net fixed assets 1,260 Equity 2,520 Total assets $4,200 Total claims $4,200 1. The company's current debt ratio is 2. If the company purchases the equipment by taking a loan, the total debt in the balance sheet will and the debt ratio will change to 3. If the company leases the equipment, the company's debt ratio will because the lease is not capitalized. under a lease agreement as compared to the finandial…A mine operating company approaches an Islamic financial firm to obtain lease financing for some large and quite unique equipment. The financial firm is concerned it will not be able to sell the equipment at the end of the lease term. What form of financing should it propose?
- ??Walker Company is a manufacturer and lessor of computer equipment. What should be the nature of its lease arrangements with lessees if the company wishes to account for its lease transactions as sales-type leases?You are required to read IFRS 16 – Leases and answer following questions. IFRS16 standard is available on the website (https://www.ifrs.org/issued-standards/list-of-standards/ifrs-16-leases/) REQUIRED 1. Explain whether standard for leases reflect economic reality. 2. How the current standard treat off balance sheet leases and liabilities? 3. Airline companies lease most of their aircraft and high impact on their balance sheet. How the lease accounting standard is dealing with Airline industry? 4. Do you think the lease standard will be welcome be all the industry sector? Explain why and why not. 5. How the lease standard will help the investors to make better informed decision?