On June 30, 2018, Fly-By-Night Airlines leased a jumbo jet from Boeing Corporation. The terms of the leaserequire Fly-By-Night to make 20 annual payments of $400,000 on each June 30. Generally accepted accountingprinciples require this lease to be recorded as a liability for the present value of scheduled payments. Assume thata 7% interest rate properly reflects the time value of money in this situation.Required:1. At what amount should Fly-By-Night record the lease liability on June 30, 2018, assuming that the first payment will be made on June 30, 2019?2. At what amount should Fly-By-Night record the lease liability on June 30, 2018, before any payments aremade, assuming that the first payment will be made on June 30, 2018?
On June 30, 2018, 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 $400,000 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.
Required:
1. At what amount should Fly-By-Night record the lease liability on June 30, 2018, assuming that the first payment will be made on June 30, 2019?
2. At what amount should Fly-By-Night record the lease liability on June 30, 2018, before any payments are
made, assuming that the first payment will be made on June 30, 2018?
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