Question

One of the most advantages of using operating leases is the potential tax benefits. A lease...

One of the most advantages of using operating leases is the potential tax benefits. A lease may allow the business to deduct the payments as operating expenses during the period that the business paid them. How would the capital lease impact the financial statements? Create a positive and negative argument in this regards.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Capital Lease- It is a contract of using an asset on temporary basis. Operating lease does not hae impact of financial statement while capital lease has.

Capital lease is recorded as asset as well as liability in the balance sheet. When lease is taken, it is considered "Purchase of asset" in certain criteria. The asset is depreciated. Capital lease payment has two elements: Principal and interest, Interest is shown in the income statement.

So we can say that capital lease has an impact on company's financial statements and the items include; depreciation and interest in the income statement and also as asset and liability.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1.       Select the group of words missing from the statement below about the nature of cash...
1.       Select the group of words missing from the statement below about the nature of cash budgets: “Cash budgets are prepared to reflect the estimated cash ______ and _______ for the period to be covered by the budget. Clearly a projected _______ cash balance will require corrective action. Even if the cash budget predicts a _______ net balance, it may be necessary to review it to take into account any potential ________ in the expected cash flows or to provide...
The following article does a good job of breaking down the advantages/disadvantages of leasing vs. purchasing...
The following article does a good job of breaking down the advantages/disadvantages of leasing vs. purchasing vehicles: Title: Pros and Cons of Leasing vs. Buying a Vehicle Source: http://www.investopedia.com/articles/pf/05/042105.asp Buying a car can be overwhelming. In fact, the pleasure of getting a new car can be quickly clouded during the financing decision-making process and price negotiations. Besides price haggling, many car shoppers are plagued with the decision to leaseor buy. Which financing decision is right and why? This article will...
MNCs try to internationalize the related economic transactions through locational advantages using which of the following...
MNCs try to internationalize the related economic transactions through locational advantages using which of the following investments? Market-oriented investments Natural resources investments Efficiency-oriented investments All of the above MNCs can potentially harm the countries that host them because the FDI technology transfers may further produce positive externalities. their tactics may crowd out domestic producers on domestic capital markets. the host countries may not generate more human capital once they start receiving enough physical capital resources. they could expand networks to...
All of the following are benefits to using a multi-step income statement instead of a single-step...
All of the following are benefits to using a multi-step income statement instead of a single-step income statement except: A. The multiple-step income statement clearly states the gross profit amount. Many readers of financial statements monitor a company's gross margin (gross profit as a percentage of net sales). Readers may compare a company's gross margin to its past gross margins and to the gross margins of the industry. B. The multiple-step income statement presents the subtotal operating income, which indicates...
Assess the proper accounting for transactions with respect to deferred taxes and leases using the accounting...
Assess the proper accounting for transactions with respect to deferred taxes and leases using the accounting codification and other accounting research tools. Scenario CM Corporation (CMC) was founded six years ago by Phil Connor and Eric Martin. The company designs, installs, and services security systems for high-tech companies. The founders, who describe themselves as "entrepreneurial geeks," met in a computer lab when they were teenagers and found they had common interests in working on security systems for critical industries. CMC...
Multiple Choices Interest expense in GAAP financial statements is computed based on: The coupon rate times...
Multiple Choices Interest expense in GAAP financial statements is computed based on: The coupon rate times the carrying value of the debt The coupon rate times the face value of the debt The effective rate times the carrying value of the debt The effective rate times the face value of the debt Coopers Inc. issued $10,000,000 of 10-year bonds on 1/1/2016 for $10,858,432. The bonds pay interest semi-annually. A journal entry was recorded for the first interest payment on June...
Calculate the quick ratio using the following information. (Round to two decimal places.) Cash $50,000 Accounts...
Calculate the quick ratio using the following information. (Round to two decimal places.) Cash $50,000 Accounts receivable $130,000 Inventories $210,000 Prepaid assets $15,000 Current liabilities $200,000 a.0.98 b.2.50 c.0.90 d.1.35 The ability of a company to pay debts as they become due is best analyzed using: a.net cash flows from operating activities. b.accrual accounting. c.the cash inflows from financing activities. d.the cash basis of accounting. Which of the following is true of the accrual basis of accounting? a.Only individuals and...
Accounting for Financial Management: Free Cash Flow The focus on traditional financial statements is -Select-marketaccountingreplacementItem 1...
Accounting for Financial Management: Free Cash Flow The focus on traditional financial statements is -Select-marketaccountingreplacementItem 1 data rather than cash flow. However, cash flow is important to investors, managers, and stock analysts. Therefore, decision makers and security analysts need to modify financial statement data provided to them. An important modification is the concept of free cash flow (FCF). Many analysts regard FCF as being the single and most important number that can be developed from the income statements, even more...
1)Which of the following is a driver of globalization? a) Trade barriers and controls on inflows...
1)Which of the following is a driver of globalization? a) Trade barriers and controls on inflows of foreign direct investment b) Weak competition c) Technological advance d) Economies of scale are being exploited to the maximum 2) Globalization is beneficial for firms because a) It protects them against foreign competition b) It cushions them from the effect of events in other countries c) It open up new market opportunities d) It increases the risk and uncertainty of operating in a...
51) You are working on a 3-statement model for this same airline company, and you decide...
51) You are working on a 3-statement model for this same airline company, and you decide to project the number of aircraft and the fleet composition separately.Your co-worker sees this and says that you are wasting time because these assumptions will barely make a difference next to the direct revenue and expense assumptions. Which of the following answer choices represent the BEST ways to respond to your co-worker? a) We need this level of detail because the number of aircraft...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT