Question

Airline CF leases all its aircraft under capital / finance leases. Airline O leases all its aircraft under operating leases. Assuming that the two airlines are otherwise identical except for the mentioned lease classifications, which of the following comments is true:__________a. None of the listed answersb. When comparing aircraft capitalized on the balance sheet, Airline CF has less than Oc. Airline O has a higher EBITDA margind. Airline O has more liabilitiese. Airline CF has lower interest expense

Answer 1

Answer:

Airline CF and Airline O

The true comment is:

a. None of the listed answers

Explanation:

Under finance lease, Airline CF will recognize an asset, a balance sheet account, which it depreciates periodically, while under operating lease, Airline O will only recognize expenses for the rental payments, an income statement item.  Airline CF pays annual lease payments (repayment of lease liability and interest expense).  Airline O pays rental expenses only.