Question Details

Different aircraft lease transactions that occurred for Western Airways




Presented below are three different aircraft lease transactions that occurred for Western Airways in 2011. All the leases start on January 1, 2011. In no case does Western receive title to the aircraft during or at the end of the lease period; nor is there a bargain purchase option.
						Lessor	
	Utah Insurance	Laine Leasing	  Howard Leasing	
Type of property	767 Aircraft	727 Aircraft	L-1011 Aircraft
Yearly rental	$8,272,293	$4,954,021	$2,851,861
Lease term	20 years	15 years	23 years
Estimated economic life	25 years	25 years	25 years
Fair value of 
   leased asset	$77,000,000	$49,000,000	$32,000,000
Present value of lease
   rental payments	$73,000,000	$42,000,000	$28,000,000

Instructions
(a)	Which of the above leases are operating leases and which are finance leases? Explain your answer.
(b)	How should the lease transaction with Utah Insurance be recorded in 2011?
(c)	How should the lease transaction with Laine Leasing be recorded in 2011?




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