On June 30, 2024, Fly-By-Night Airlines leased a jumbo jet from Boeing Corporation. The terms of the lease require Fly-By-Night to make 20 annual payments of $400,000 on each June 30. Generally accepted accounting principles require this lease to be recorded as a liability for the present value of scheduled payments. Assume that a 7% interest rate properly reflects the time value of money in this situation.
Required:
1. At what amount should Fly-By-Night record the lease liability on June 30, 2024, assuming that the first payment will be made on June 30, 2025?
2. At what amount should Fly-By-Night record the lease liability on June 30, 2024, before any payments are made, assuming that the first payment will be made on June 30, 2024?
