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Show all necessary adjusting entries

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Problem - Royal Express is a foreign parcel service company and leases its Boeing 777 jet with an annual lease payment of $5 million US dollar equivalent of foreign currency on January 1, 20X1. The lease term is for 10 years which is the total useful life of the airplane. The local accounting standard allows the lease to be accounted as an operating lease. Assume no income tax and discount rate is 10%. Discount factors for present value are: 6.1446 for $1 annuity for 10 years at 10%, and 0.3855 for $1 payment at 10th year at 10%.

Show all necessary adjusting entries that would convert the company's financial statements ending 12/31/20X1 to the US GAAP which requires the capitalization of the lease.

Reference no: EM132953214

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