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1. On January 1. 201?. Flying High Airlines leased a new airplane for a term of 1D years. The expected life ofthe airplane is 23 years. There are no

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Can anyone help me with these two questions? I am not quite sure whether my answers are correct.

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1. On January 1. 201?. Flying High Airlines leased a new airplane for a term of 1D years.
The expected life ofthe airplane is 23 years. There are no rights to purchase the asset at
the end of the term. no bargain purchase option. and no residual value guarantee. The
lease stipulates that Flying High makes annual payments of 3659.000 beginning at the end ofthe first year {December 31. 201?). Flying High has an incremental borrowing rate
of4.5% and the fair market value ofthe airplane on January 1. 201? is 955350.000 [for
simplicity. assume the lessor’s implicit rate is greater than4.5%).
a. "What journal entries related to the lease arrangement should be recorded during
2917(assume Flying High’s fiscal year end is December 31). b. Identify any effects the lease arrangement and the associated reporting would
have on the balance sheet. income statement. and statement of cash flows for EDIT. c. 'What is the annual lease payment that results in a present value of minimum lease
payments equal to 99% of the fair market value of the airplane {36.250.999)? 2. Now assume that the lessor decided to require the lease payments at the beginning of the
year as opposed to the end of the year. Also assume that the lease arrangement hada
bargain purchase option under which the lessee could purchase the airplane at the end of
the contract for $250.DDD. a. 'What journal entries related to the lease arrangement should be recorded during
EDI 7".
b. Identify any effects the lease arrangement and the associated reporting would have on the balance sheet. income statement. and statement of cash flows for
2D] 7".

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