On June 30, 2016, 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, 100,000 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.)
At what amount should Fly-By-Night record the lease liability on June 30, 2016. assuming that the first payment will be made on June 30, 2017?
At what amount should Fly-By-Night record the lease liability on June 30, 2016, before any payments are made, assuming that the first payment will be made on June 30, 2016?