On June 30, 2021, 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 $1,700,000 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. (FV of $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, 2021, assuming that the first payment will be made on June 30, 2022? 2. At what amount should Fly-By-Night record the lease liability on June 30, 2021, before any payments are made, assuming that the first payment will be made on June 30, 2021?
On June 30, 2021, 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 $1,700,000 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. (FV of $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, 2021, assuming that the first payment will be made on June 30, 2022? 2. At what amount should Fly-By-Night record the lease liability on June 30, 2021, before any payments are made, assuming that the first payment will be made on June 30, 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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20. On June 30, 2021, 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 $1,700,000 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. (FV of $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, 2021, assuming that the first payment will be made on June 30, 2022?
2. At what amount should Fly-By-Night record the lease liability on June 30, 2021, before any payments are made, assuming that the first payment will be made on June 30, 2021?
Transcribed Image Text:Required 1
Required 2
At what amount should Fly-By-Night record the lease liability on June 30, 2021, before any payments are made, assuming
that the first payment will be made on June 30, 2021? (Round your final answers to nearest whole dollar amount.)
Table or calculator function:
Payment:
n =
i =
PV - 06/30/2021:
< Required 1
Required 2 >
Transcribed Image Text:Required 1
Required 2
At what amount should Fly-By-Night record the lease liability on June 30, 2021, assuming that the first payment will be made
on June 30, 2022? (Round your final answers to nearest whole dollar amount.)
Table or calculator function:
Payment:
n =
i =
PV - 6/30/2021:
< Required 1
Required 2 >
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