Another 'wording' question - adjustment for operating lease
I’m a bit cracked out right now so perhaps I’m missing something that is totally clear to everyone, but, wouldn’t it be clear if they specified what you are adjusting from and to? What throws me off here is that the operating lease, for the lessee, means an outflow in CFO due to the rent expense. That is it. No depreciation. Unfortunately the more I read this answer the more confused I get. If anyone has some pointers, that would be appreciated.
10. XYZ corporation is the lessee in a non-cancelable operating lease. which of
the following best describes the effect of adjusting XYZ’s financial statements
for analytical purposes?
A. the current ratio would increase.
B. the debt-to-equity ratio would decrease.
c. operating profit would increase.
10. C
when adjusting the income statement for an operating lease, the rent expense is added
back to operating income and depreciation expense on the lease asset is subtracted.
the rental payment will likely exceed the implied depreciation expense; thus, operating
income will increase. Interest expense will also be increased by interest on the lease
liability, but this will not affect operating income. the D/e ratio will increase. the
current ratio will decrease because the current portion of the lease liability will increase
current liabilities. |
发表于 2011-7-11 19:39
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