Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor. To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

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Answer 1

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

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The following statements relate to the impact on the financial statements for operating vs. finance leases. Indicate all statements that are correct. Select one or more: a. Net Income is higher at first when a lease is classified as a finance lease. b. The right of use asset is shown at a higher amount for a finance lease. c. Operating Income is lower when a lease is classified as an operating lease. d. The lease liability is measured as the present value of future cash flows for both operating and finance leases. PreviousSave AnswersNext

Which of the following statements is characteristic of leases? a.If a lease is classified as an operating lease, the lessee records an asset on its statement of financial position. b.Lease agreements are not a popular form of financing the purchase of assets because leases require a large initial outlay of cash. c.If a lessor classifies a lease as a finance lease, the lessor records a lease liability on its statement of earnings. d.Accounting recognizes two types of leases—operating and finance.

Leasing is often referred to as off-balance-sheet financing because of the way that the transaction is treated and reported in financial statements. According to the FASB-issued Statement 13, which of the following statements is true? The present value of all future lease payments should be reported as assets on the balance sheet. Leased assets should be reported as current assets on the balance sheet. The present value of all past lease payments should be reported as a liability on the balance sheet. Assets leased under financial or capital leases should be reported as fixed assets on the balance sheet. Consider the following statement on capital leases: According to Statement 13, the payments on a financial lease should be treated as an operating expense and should not in any case. affect a firm's true debt ratio. Is the preceding statement is true or false. True False

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

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Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

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Answer 5

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

Answer 6

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

Answer 7

Chapter 4, Problem 4.9C

a

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the asset who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of creditors and investors if a lease is recorded as a liability or recorded in footnotes.

Answer 8

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

Answer 9

b

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The difference in the perception of investors for security prices if a lease is recorded as a liability or recorded in footnotes.

Answer 10

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

Answer 11

c

To determine

Introduction:Leasing is an agreement between two parties; one is the lessor, and the other is the lessee. The lessor is the owner of the assets who grants the right to use the asset to the lessee, and in return, the lessee provides a monthly fixed payment to the lessor.

To explain: The motivation of the company for making structural leasing agreements.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 4 - Prob. 4.1C Ch. 4 - Prob. 4.2C Ch. 4 - Prob. 4.3C Ch. 4 - Prob. 4.4C Ch. 4 - Prob. 4.5C Ch. 4 - Prob. 4.6C Ch. 4 - Prob. 4.7C Ch. 4 - Prob. 4.8C Ch. 4 - Prob. 4.9C

Solution Summary: The author explains the difference in the perception of creditors and investors if a lease is recorded in footnotes.

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