Presented Below Are Three Different Aircraft Lease Transactions That Occurred

Presented below are three different aircraft lease transactions that occurred for Midwest Airways in 2010. All the leases start on January 1, 2010. In no case does Midwest receive title to the aircraft during or at the end of the lease period; nor is there a bargain purchase option.
Instructions
(a) Which of the above leases are operating leases and which are capital leases? Explain your answer.
(b) How should the lease transaction with Winsor Insurance be recorded in 2010?
(c) How should the lease transaction with Gray Leasing be recorded in 2010?

Correct Answer:

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(a) The Winsor Insurance lease is a capi...

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