Below are three lease transactions for VNN Airways in 20XX as the Lessee. All leases start on 1/1/XX.

Lessors

BJN Leasing CMN Leasing BVC Leasing

Type of property. 787 Aircraft. 727 Aircraft. L-1011 Aircraft

Yearly rental. $7,445,064 $5,449,423 $2,851,861

Lease term 15 years 15 years 20 years

Estimated economic life 25 years 25 years 25 years

Fair market value of leased asset $69,300,000 $54,000,000 $32,000,000

Present value of the rental payments$63,000,000 $46,000,000 $28,000,000

Purchase price at end of lease $15,000,000 $9,000,000 $7,000,000

Instructions (and a hint: remember the four criteria for a capital lease? Only one needs to be met)

1. Identify the three above leases as either operating or capital leases, and explain your answer.
2. Record the initial journal entry for any of the above that are capital leases.
3. Record the journal entry for any of the above that are operating leases.