LeasesDelta Airlines signs a finance lease for new aircraft…
LeasesDelta Airlines signs a finance lease for new aircraft valued at $120 million. The lease requires equal annual payments for 10 years, with the first payment due at year-end. The interest rate is 6%. a. Explain how Delta should initially record the lease under current accounting standards. b. Why might a company prefer a finance lease instead of purchasing the asset outright? c. Identify and explain how Delta’s first year of lease activity would impact both the income statement (specific expenses) and balance sheet (assets and liabilities).