Shuttle Master Airlines Has Leased an Aircraft from Streamline Aircraft

question 96

Multiple Choice

Shuttle Master Airlines has leased an aircraft from Streamline Aircraft Company.The annual payments are $1,000,000,and the life of the lease is 18 years.It is estimated that the useful life of the aircraft is 20 years.How would Shuttle Master Airlines record the acquisition of the aircraft? The effective rate of interest is 9%.

• A)The company would not record the aircraft as an asset but would record rent expense of $1,000,000 per year for 18 years.
• B)The company would not record the aircraft as an asset but would record rent expense of $900,000 per year for 20 years.
• C)The aircraft would be recorded as an asset with a cost of $8,756,000.
• D)The aircraft would be recorded as an asset with a cost of $9,129,000.

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Definitions:

Market Price

The current price at which a good or service can be bought or sold in the open market.

Strike Price

The specified price at which the holder of an option can buy or sell the underlying security.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace, determined by supply and demand dynamics.

Strike Price

In options trading, the predetermined price at which the holder of the option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.