East-West Airlines Is Planning on Leasing an Aircraft

question 36

Essay

East-West Airlines is planning on leasing an aircraft. East-West does not receive title to the aircraft during or at the end of the lease period. Also, the lease does not contain a bargain purchase option. Using the lease information shown below indicate whether the lease is a capital lease or an operating lease and explain why.
Type of property - Aircraft
Yearly rental - $9,500,000
Lease term - 15 years
Estimated economic life - 25 years
Fair market value of the leased asset - $85,000,000
Present value of lease rental payments - $77,000,000

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Definitions:

Prions

Infectious, misfolded proteins that can cause a variety of neurodegenerative diseases by inducing normal proteins in the brain to also misfold.

Vitamin B Deficiency

A shortfall of B vitamins in the diet, leading to various health issues such as anemia, fatigue, and neurological impairments.

Amphetamine

Synthetic compound that increases the neurotransmitter dopamine in the synaptic cleft by reversing the dopamine transporter.

Spine Density

The amount of dendritic spines (tiny protrusions on neurons used for synaptic transmission) present per unit length of dendrite, indicating the potential for synaptic connectivity.