Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Chapter 16, Problem 20DQ
Summary Introduction
To explain: The close parallel between a borrow-purchase decision and the capital lease with regards to the income statement and the
Introduction:
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Students have asked these similar questions
1. Which statement is incorrect about initial direct costs?
a. Initial direct costs incurred by the lessee in finance lase are added to the amount recognized as an asset and to the finance lease liability.
b. In a direct financing lease, initial direct costs are added to the net investment in the lease.
c. In a sales type lease, initial direct costs are expensed as component of cost of goods sold.
d. For operating leases, initial direct costs are deferred and allocated over the lease term.
2. If the lessor and lessee use different interest rates to account for a finance lease, then
a. The lessor will use different account titles to record the leasing transactions
b. Total expenses and revenues will be equal
c. Total expenses and revenues will be different
d. The lessee and the lessor cannot use different interest rates
3. In the case of a lease of land and building where title to the land is not transferred, the lease is generally treated as if:
a. Both land and building are finance…
It is that portion of the lease payments that is not fixed in amount but isbased on a factor other than just the passage of time, for example,percentage of sales, amount of usage, price index and market rate ofinterest
A. Variable rentB. Contingent rentC. Bargain purchase optionD. Executory cost
According to the fair value principle, assets and liabilities should be reported
Select answer from the options below
1.at their fair market value.
2.at their historical cost.
3.at a value agreed upon by interested parties.
4.at cost plus inflation.
Chapter 16 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 16 - Prob. 1DQCh. 16 - What are some specific features of bond...Ch. 16 - What is the difference between a bond agreement...Ch. 16 - Discuss the relationship between the coupon rate...Ch. 16 - Prob. 5DQCh. 16 - What method of “bond repayment� reduces debt...Ch. 16 - What is the purpose of serial repayments and...Ch. 16 - Under what circumstances would a call on a bond be...Ch. 16 - Discuss the relationship between bond prices and...Ch. 16 - Prob. 10DQ
Ch. 16 - Prob. 11DQCh. 16 - Bonds of different risk classes will have a spread...Ch. 16 - Prob. 13DQCh. 16 - Prob. 14DQCh. 16 - Explain how the zero-coupon rate bond provides...Ch. 16 - Prob. 16DQCh. 16 - Prob. 17DQCh. 16 - Prob. 18DQCh. 16 - Prob. 19DQCh. 16 - Prob. 20DQCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Assume the par value of the bonds in the following...Ch. 16 - Assume the par value of the bonds in the following...Ch. 16 - Assume the par value of the bonds in the following...Ch. 16 - Assume the par value of the bonds in the following...Ch. 16 - Prob. 7PCh. 16 - Assume the par value of the bonds in the following...Ch. 16 - Assume the par value of the bonds in the following...Ch. 16 - Prob. 10PCh. 16 - Prob. 11PCh. 16 - Prob. 12PCh. 16 - Prob. 13PCh. 16 - Prob. 14PCh. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Prob. 18PCh. 16 - Prob. 19PCh. 16 - Krawczek Company will enter into a lease agreement...Ch. 16 - The Harris Company is the lessee on a four-year...Ch. 16 - Prob. 2WECh. 16 - Prob. 3WE
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Similar questions
- Define each of the following terms: a. Lessee; lessor b. Operating lease; financial lease; sale-and-leaseback; combination lease; synthetic lease; SPE c. Offbalance sheet financing; capitalizing d. FASB Statement 13; ASU 2016-02 e. Guideline lease f. Residual value g. Lessees analysis; lessors analysis h. Net advantage to leasing (NAL) i. Alternative minimum tax (AMT)arrow_forwardIn Note 4, “Summary of accounting policies,” part 4.14, “Leases,” AF states that“leases are classified as finance leases when the lease arrangement transferssubstantially all the risks and rewards of ownership to the lessee.” Is this the policycompanies using U.S. GAAP follow?arrow_forwardCh19-1: Is leasing a zero sum game in the sense that any gain to the lessee is a cost to the lessor? If not, how might both parties gain from a lease transaction? In your answer, explain how lessee and the lessor analyze the situation, why they might use different inputs in their analysis, and how those inputs differences could affect the outcomearrow_forward
- Which of the following statements is true about initial direct costs? A. Initial direct costs of a sales-type lease should be expensed at the commencement of the lease only if no selling profit or loss has been incurred. B. Initial direct costs are ownership-type costs such as insurance, maintenance, and taxes. C. Initial direct costs of an operating lease should be recorded by the lessor as a prepaid asset. D. Initial direct costs should always be debited against income by the lessor in the period of the inception of the lease.arrow_forwardThe 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 AnswersNextarrow_forwardWhat are the measurement issues in the IFRS16 Leases standards.? a)Which basis of measurement is allowed? b)why Why do you think that measurement basis is preferred(explain by referring to qualitative characteristics of financial information)arrow_forward
- In the context of handling debt - like items in M&A, what is the most buyer-friendly approach for items representing a hard claim that must be paid post-close? a. Purchase price adjustments b. Escrow accounts c. Insurance policies d. Working capital adjustments e. Debt refinancingarrow_forwardCompared to using a fi nance lease, a lessee that makes use of an operating lease will mostlikely report higher:A . debt.B . rent expense.C . cash fl ow from operating activity.arrow_forwardWhich of the following ratios would be most useful in determining a company’s ability tocover its lease and interest payments?C . Fixed charge coverage.arrow_forward
- Debt Instrument investment can be classified under the following, Except? FAFVPL At Amortized Cost FAFVOCI Held to Maturityarrow_forwardDescribe the effect on the lessee of a “bargain purchase option” on accounting for a finance lease transaction.arrow_forwardUnder a 75% LTV term loan structure, when is the balance of funds released by the lender to the vendor? Review Later Before the borrower’s equity contribution, after delivery of the asset to the borrower. After the borrower’s equity contribution, before the delivery of the asset to the borrower. Before the borrower’s equity contribution and the delivery of the asset. After the borrower’s equity contribution, and preferably after the asset is in the borrower’s possessionarrow_forward
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