Friday, August 21, 2015

Calculate A Plane Lease

Calculate an Aircraft Lease


Aircraft leasing allows a company to avoid purchasing an airplane and dealing with the hassles involved with maintenance and flight crews. Many types of aircraft leases exist. For example, two major lease groups are wet and dry. Wet leases provide companies with the aircraft, crew, maintenance and insurance; these are typically short-term leases. Dry leases provide just the aircraft; these are longer-term leases and require the lessee to provide the other items for operating the plane. A third type, a damp lease, is a hybrid of the other two options. Calculating a lease typically relates to the recording of the lease on the lessee's accounting books.


Instructions


1. Determine if the lease is operating or finance. An operating lease is short-term and does not transfer ownership from the lessor to the lessee. Finance leases (also known as "capital" in accounting terms) will transfer ownership of the aircraft at the end of the lease.


2. Measure the conditions for a finance lease. An aircraft lease is classified as a finance lease if it includes a purchase agreement at the end of term. If the lease payments are more than 90 percent of the plane's market value or 75 percent of the plane's useful life, it is a finance lease.


3. Record an operating lease as rental payments and a finance lease as an asset. Payments made under an operating lease post each month as an expense. Companies will record a finance lease as an asset and depreciate the value of the lease over time according to standard accounting principles.