Leasing is often referred to as off-balance-sheet financing because of the way that the transaction is treated and repor
Posted: Sun May 29, 2022 6:27 pm
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.
Assets leased under financial or capital leases should be
reported as fixed assets on the balance sheet.
The present value of all past lease payments should be reported
as a liability on the balance sheet.
Leased assets should be reported as current 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 true or false?
True
False
To consider the financial statement effects of leasing versus
purchasing an asset, review the following case of Sunny Company
Sunny Company needs equipment that will cost the company $200.
Sunny Company is considering to either purchase the equipment by
borrowing $200 from a local bank or leasing the equipment. Assume
that the lease will be structured as an operating lease.
Some data from Sunny Company’s current balance sheet prior to
the lease or purchase of the equipment are:
Balance Sheet Data
(Dollars)
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.
Assets leased under financial or capital leases should be
reported as fixed assets on the balance sheet.
The present value of all past lease payments should be reported
as a liability on the balance sheet.
Leased assets should be reported as current 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 true or false?
True
False
To consider the financial statement effects of leasing versus
purchasing an asset, review the following case of Sunny Company
Sunny Company needs equipment that will cost the company $200.
Sunny Company is considering to either purchase the equipment by
borrowing $200 from a local bank or leasing the equipment. Assume
that the lease will be structured as an operating lease.
Some data from Sunny Company’s current balance sheet prior to
the lease or purchase of the equipment are:
Balance Sheet Data
(Dollars)