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.TrueFalse

A lease is an arrangement whereby the lease taker owns the assets' usage from the actual asset owner…

Answered: Leasing is often referred to as…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Generally accepted accounting principles require that certain leaseagreements be accounted for as purchases. The theoretical basis for thistreatment is that a lease of this type A. Effectively conveys all of the benefits and risks incident to the ownership of property B. Is an example of form over substance C. Provides the use of the leased asset to the lessee for a limited period of time D. Must be recorded in accordance with the concept of cause and effect
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.
When a lessee makes periodic cash payments for a finance lease, which of the following accounts is increased? A.Lease Liability B.Lease Rental Expense C.Right-of-Use Asset D.Interest Expense
An operating lease: Is recorded at its net present value on the balance sheet. Is recorded on the balance sheet as both an asset and a liability. Is recorded at its estimated residual balance on the balance sheet. Is reflected in the footnotes rather than on the balance sheet. Does not appear either on a financial statement or in the footnotes.
9. Which of the following statements is not true. (A) Capitalized leases should be reported on the statement of financial position. (B) All leases must be capitalized. (C) The lessor is the owner of the property in a lease arrangement. (D) The lease liability is determined by computing the present value of the lease payments.
When a lessee makes periodic cash payments for a finance lease, which of the following accounts is decreased? A.Right-of-Use Asset B.Lease Rental Expense C.Interest Expense D.Lease Liability
Which of the following is true regarding IFRS 16? a. Lessors shall recognize assets held under a contract of lease as a receivable at an amount equal to the net investment in the lease. b. Lessors shall recognize assets held under a contract of lease as a receivable at an amount equal to the cost of the asset which is the subject of the lease. c. Lessors shall recognize assets held under a finance lease as a receivable at an amount equal to the net investment in the lease. d. Lessors shall recognize assets held under a finance lease as a receivable at an amount equal to the cost of the asset which is the subject of the lease less any initial direct cost paid by the lessor.
TRUE OR FALSE? 1. Current assets less current liabilities equals net assets.2. The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.3. The effect of a lender agreeing to give the borrowing entity a grace period within the reporting period will make a liability noncurrent.
Under ASC Topic 840 and IFRS 16, FASB and IASB revised lease accounting rules to address off-balance sheet financing. True or False
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.
TRUE OR FALSE? The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.
The indenture is a contract between the issuer and lenders that does all the following EXCEPT ______. a. specify the manner in which the principal must be repaid b. give management's expectations about return of the proceeds c. list any restrictive covenants d. detail the nature of the debt issue

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