Delta airline leased an aircraft from Boing Corporation with the following conditions:

-lease term is 10 years and estimated economic life of the aircraft is 11 years.

-annual rent of $5 million with first payment is on 1/1/2020 and on 12/31 for each of the following years.

-the cost of the aircraft to Boing was $$ 30 million.

-assumed interest rate is 10%.

Required:

A. What type of lease is this for both Delta and Boing? Why?

B. Make journal entries by Boing for the first year 1/1/2020 to 12/31 2020.

C. Use this PV table:

Present value of Annuity Due:

N=5, i= 5%: 4.54595

N=5, i= 10%: 4.16987

N=10, i= 5%: 8.10782

N=10, i= 10%: 6.75902

Present value of Ordinary Annuity :

N=5, i= 5%: 4.32948

N=5, i= 10%: 3.79079

N=10, i= 5%: 7.72173

N=10, i= 10%: 6.14457