4. ConAir, Inc. acquired a commuter plane in a capital lease transaction. The terms of the lease require ConAir to make 10 payments of $1 million at the BEGINNING of each year. ConAir’s usual borrowing rate is 7%. Conair uses straight line depreciation and the plane will have a zero residual value at the end of 10 years. Show the journal entries for the following:
(a) The initial acquisition of the plane.
(b) The interest expense for year 6
(c) The lease payment for year 7.
(d) Depreciation expense for year 3.
Particulars Amount(Dr) Amount(Cr) (a) Initial Acquisition Asset on lease A/C --------- Dr 65,15,000 * To Bank (Down Payment)... View the full answer