Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 25.2, Problem 1CC
Summary Introduction
To determine: The difference between the accounting treatment of operating and capital leases and aspect of this accounting treatment will change in 2019.
Introduction: Lease is a contract between the lessee and lessor for the uses of an asset. Lessee agrees to pay specific amount as per contract to the lessor for the uses for lessor asset.
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Chapter 25 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 25.1 - In a perfect capital market, how is the amount of...Ch. 25.1 - Prob. 2CCCh. 25.2 - Prob. 1CCCh. 25.2 - Is it possible for a lease to be treated as an...Ch. 25.3 - Why is it inappropriate to compare leasing to...Ch. 25.3 - Prob. 2CCCh. 25.3 - Prob. 3CCCh. 25.4 - Prob. 1CCCh. 25.4 - Prob. 2CCCh. 25 - Suppose an H1200 supercomputer has a cost of...
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- How about these questions: 1. How much is the Interest Revenue to be recognized in 2021? 2. How much is the Net Income (Loss) in 2021? 3. Assuming the collectability of the note is uncertain, how much is the Franchise Revenue to be recognized in 2021?arrow_forwardHow much should be reclassified to Retained Earnings as a result of derecognizing the investment in 2019?arrow_forwardHow much is the contract revenue to date in the year 2019?arrow_forward
- Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much interest income is to be recognized on December 31, 2020?arrow_forward1. What amount should be reported as lease liability on December 31,2020? 2. What is the initial recognition of the right of use asset?arrow_forwardUnder the pre-2019 accounting standards, how are operating leases reported in the lessee's balance sheet? Select one: A. As an asset that is depreciated, similar to the company's other assets. B. As either a short-term or long-term liability, depending on the length of the lease C. At the present value of the future minimum lease payments. D. Operating leases are not disclosed in the lessee's balance sheet or annual report. E. None of the abovearrow_forward
- a. What amount should be reported as interest expense for 2021? b. If no correction is made, by what amount would interest expense for 2021 be understated?arrow_forwardWhat amount of rental revenue should YELLOW record for 2021?arrow_forwardPrior to 2019, lessees did not include the right-of-use asset and the lease liability for operating leases on their balance sheets. Both FASB and IASB wrote new standards to require that lessees nearly always report an asset and liability on their balance sheets when they engage in a lease transaction. This accounting results in which of the following? Group of answer choices a more reliable estimation of the lease's value a better determination on whether the lessor held the risks and rewards of the leased asset's ownership a more faithful representation of the rights and obligations arising from leases All of the abovearrow_forward
- Case 2: On January, 1 2021, Silver Company entered into a lease for floor space with the following information: Floor Space Annual rental payable at the beginning of each year Lease Term Incremental Borrowing Rate Implicit Interest Rate 500 square meters 300,000 7 years 8% 10% On January 1, 2024, Silver Company and the lessor agreed to amend the original terms of the lease with the following information: Floor Space Annual rental payable at the beginning of each year Incremental Borrowing Rate Implicit Interest Rate When present value is needed, round off the present value factor to two decimal places. 200 square meters 120,000 10% 12%arrow_forwardWhat are the two types of losses that can become evidentin accounting for long-term contracts? What is the natureof each type of loss? How is each type accounted for?arrow_forward1. Assuming the investment is appropriately recognized as financial assets at amortized cost: What is the carrying value of the investment on December 31, 2020? 2. Assuming the investment is appropriately recognized as financial assets at amortized cost: Determine the gain or (loss) to be recorded upon the sale of the investment. 3. Assuming the investment is appropriately recognized as financial assets at amortized cost: How much interest income is to be recognized in 2021?arrow_forward
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