Corporate Finance with Connect 1 Semester Access Card
11th Edition
ISBN: 9781259621789
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 21, Problem 7CQ
Off- Balance Sheet Financing What is meant by the term off- balance sheet financing? When do leases provide such financing, and what arc the accounting and economic consequences of such activity?
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Students have asked these similar questions
Off-Balance Sheet Financing
What is meant by the term “off-balance sheet financing”? When do leases provide such financing and what are the accounting and economic consequences of such activity?
Why is lease financing sometimes referred to as off–balance sheetfinancing?
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?
Assets leased under financial or capital leases should be reported as fixed 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.
The present value of all future lease payments should be reported as assets on the balance sheet.
Chapter 21 Solutions
Corporate Finance with Connect 1 Semester Access Card
Ch. 21 - Leasing vs. Borrowing What are the key differences...Ch. 21 - Leasing and Taxes Taxes are an important...Ch. 21 - Leasing and IRR What arc some of the potential...Ch. 21 - Leasing Comment on the following remarks: a....Ch. 21 - Accounting for Leases Discuss the accounting...Ch. 21 - IRS Criteria Discuss the IRS criteria for...Ch. 21 - Off- Balance Sheet Financing What is meant by the...Ch. 21 - Sale and Leaseback Why might a firm choose to...Ch. 21 - Leasing Cost Explain why the aftertax borrowing...Ch. 21 - Leasing vs. Purchase Why wouldnt Azul Linhas Arcas...
Ch. 21 - Reasons to Lease Why would ILFC be willing to buy...Ch. 21 - Leasing What do you suppose happens to the plane...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Prob. 7QPCh. 21 - Prob. 8QPCh. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Debt Capacity Monster Magnet Manufacturing is...Ch. 21 - Setting the Lease Price An asset costs 720,000 and...Ch. 21 - Lease or Buy Wolfson Corporation has decided to...Ch. 21 - Setting the Lease Price An asset costs 590,000 and...Ch. 21 - Automobile Lease Payments Automobiles arc often...Ch. 21 - Prob. 17QPCh. 21 - Lease or Buy High electricity costs have made...Ch. 21 - THE DECISION TO LEASE OR BUY AT WARF COMPUTERS...Ch. 21 - DECISION TO LEASE OR BUY AT WARF COMPUTERS Warf...Ch. 21 - DECISION TO LEASE OR BUY AT WARF COMPUTERS Warf...Ch. 21 - DECISION TO LEASE OR BUY AT WARF COMPUTERS Warf...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- What is the basic difference between the accounting procedures used by a lessor for a sales-type lease and those used for a direct-financing lease?arrow_forwardIn accounting for a finance lease/sales-type lease, how are the lessee’s and lessor’s income statements affected?arrow_forwardHow is interest expense determined in a finance lease transaction? How does the approach compare to otherforms of debt (such as bonds payable or notes payable)?arrow_forward
- How do you think expense stops and CPI adjustments in leases affect the riskiness of the lease from the lessor’s point of view?arrow_forwardThe accounting concept that is principally used to classify leases into operating and finance is a. Prudence b. Neutrality c. Substance over form d. Completenessarrow_forwardWhat is the basic concept of “substance over form” influences lease accounting? Explain.arrow_forward
- Explain the difference in lessee income statement and balance sheet presentation for a finance versus an operating lease.arrow_forwardWhy do we need to differentiate lessor accounting for direct financing lease and sales-type lease?arrow_forwardIn accounting for a finance lease/ Sale-type lease, how are the lessee's and lessor's income statements affected?arrow_forward
- Which of the following cash flows is classified as an investing cash flow? A. interest portion of payment received under a direct financing lease B. reduction of a direct financing lease receivable C. purchase of an asset leased under a sales-type lease D. payment received under an operating leasearrow_forwardWhat are the differences between a direct-financing and a sales-type lease for a lessor? Why would a lessor provide direct-financing to a lessee? What types of organizations provide direct-financing leases?arrow_forwardHow may the use of leases shift the risk of rising expenses from the lessor to the lessee?arrow_forward
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