Ask Question, Ask an Expert


Ask Accounting Basics Expert

Q1) At December 31, 2004, American Airlines had 231 jet aircraft under operating leases and 94 aircraft under capital leases. Lease disclosures accompanying America's 2004 financial statements are reproduced below:

American leases different kinds of equipment and property, mainly aircraft and airport facilities. Future minimum lease payments needed under capital leases, together with present value of such payments, and future minimum lease payments needed under operating leases which have initial or remaining non-cancelable leases terms in excess of one year as of December 31, 2004, were (in millions):

Year ending December 31, Capital leases Operating leases
2005 $211 $1,066
2006 233 999
2007 187 982
2008 225 931
2009 174 838
2010 and subsequent 950 7,525
  1,980 $12,341

Less amount representing interest 815, Present value of net minimum lease payments $ 1,165

American's capital lease liability is reported among other debt on balance sheet. Company's debt totaled $25,567 million. Some analysts might consider operating lease commitments as equivalent to debt when assessing financial risk. If American's operating leases were considered capital leases, lease payments would be capitalized at present value of all future payments.


If operating lease commitments are considered equivalent to debt, determine percentage of American's debt is represented by lease liabilities?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919623

Have any Question? 

Related Questions in Accounting Basics

How many postings to fees earned for the month would be

How many postings to Fees Earned for the month would be needed in Eye Opener 3 if the procedure described in (a) Had been used; if the procedure described in (b) Had been used?

At its inception the lease term of lease g is 65 of the

At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a bargain purchase option. The lessee should record Lease G as a. Neither an asset n ...

Accounting information systems assignment-the processes of

ACCOUNTING INFORMATION SYSTEMS ASSIGNMENT- The processes of selecting an AIS/ERP to make informed decision for investment in an accounting software. Group Assignment Scenario- B Bakery is a family owned firm with around ...

Assume the demand for a companys drug wozac during the

Assume the demand for a company's drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost $16x. Each ...

Question 1you are a licensed cpa who is a member of both

Question #1 You are a licensed CPA who is a member of both the AICPA and the Oregon Society of CPAs. You work in the Tax Compliance Department of a major publicly traded supermarket chain. The company is considering whet ...

Assessment item - review of current accounting issuestaskin

Assessment item - Review of Current Accounting Issues Task In your accounting career you will be required to analyse current accounting issues and communicate your theoretical understanding to your professional colleague ...

Taskin april 2016 the fair work ombusman released a report

Task In April 2016, the Fair Work Ombusman released a report on the findings of this inquiry on the 7 Eleven franchise network. The inquiry was prompted by allegations of systemic non-compliance with federal workplace la ...

Practice questionswhat are the main problems associated

Practice questions: What are the main problems associated with strategic management accounting?

Questionsq1 the largest current asset on waverly

Questions: Q1. The Largest current asset on Waverly Corporation's balance sheet is Short-Term Investments. The investments cost Waverly $8,660, and their market value is $9,000. Suppose Waverly holds the investments in t ...

Accountingratios1 pick a ratio and describe how it is

Accounting Ratios 1. Pick a ratio and describe how it is figured. Then discuss what this ratio tells us about an organization. Financial Statement Analysis author's Corners Video 2. What are the main objectives of ratio ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate