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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure, in an amount sufficient to support the lease payment obligation true or false explain
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- Need help with this questionarrow_forwardA lessee should classify a lease transaction as a finance lease if it is noncancelable and one or more of the five classification criteria are met. Otherwise, it is an operating lease. What are these criteria? Provide 2-3 reasons why a company would choose to lease an asset versus purchasing?arrow_forwardWhat is the difference between a "capital/financing lease" and an "operating lease"? Where on the various financial statements would we expect to find each of these leases reported?arrow_forward
- Provide correct answer for this questionarrow_forwardUnder the FASB old lease standard, when management of a company wishes to window-dress, they classify lease as a capital lease rather than operating lease to generally report: 1. Higher cash flow from operations and higher assets. 2. lower cash flow from operations and lower assets. 3. Identical cash flow from operations and the same amount of assets. 4. None of the above.arrow_forwardFirms may or may not capitalize a financial lease. Question 11Select one: True Falsearrow_forward
- The basic concept of “substance over form” influence lease accounting. Explain in detail how it does affect lease accounting?arrow_forwardWhat should be the discount rate for capitalizing the operating leases?A. If possible, the implied internal rate of return (IRR) that equates the sum of thediscounted capital lease payments with the reported PV of the payments.B. The effective interest rate (EIR) that represents the average interest rate thatthe company pays on its debt.C. The effective tax rate (ETR) that represents the average tax rate that thecompany pays on its earnings.D. None of the above.arrow_forwardFor a lessor, the leased asset appears on the balance sheet and continues to be depreciatedwhen the lease is classifi ed as:A . a sales-type lease.B . an operating lease.C . a fi nancing lease.arrow_forward
- Explain and evaluate the eff ects on financial statements and ratios of finance leases and operating leases from the perspectives of both the lessor and the lessee.arrow_forwardWhen are initial direct costs recognized in an operating lease? In a direct financing lease? In a sales-type lease? Why?arrow_forwardFinance leases are agreements that are formulated as leases, but are installment purchases, i.e., sales-like, in its economic substance. O True O Falsearrow_forward
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