Presented Below Are Three Different Aircraft Lease Transactions That Occurred

question 29

Essay

Presented below are three different aircraft lease transactions that occurred for Canada Airways in 2021. All the leases start on January 1, 2021. In no case does Canada receive title to the aircraft during or at the end of the lease period. Canada Airways is a public company. Instructions
Which of the above leases are operating leases and which are finance leases? Explain your answer.

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Definitions:

Fixed Expenses

are costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance premiums.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.

Variable Expenses

Costs that change in proportion to the level of production or sales activity.

Contribution Margin Ratio

A financial measure that gauges the proportion of sales revenue that exceeds variable costs, indicating how much revenue contributes towards covering fixed expenses and generating profit.