答案和详解如下： 1.On December 31, Sandy Company enters into an 8-year lease for a printing press. The economic life of the press is 10 years. Lease payments of $1,000,000 annually are due on December 31, beginning one year after lease signing. The interest rate implicit in the lease is 7%. Sandy Company’s incremental borrowing rate is 6%. Before entering into this lease, the balance sheet for Sandy Company was as follows (in $): Cash | 100,000 | Accounts Payable | 200,000 | Accounts Receivable | 300,000 | Long-term Debt | 1,700,000 | Inventory | 1,500,000 | Common Stock | 600,000 | Property, Plant & Equip. | 5,200,000 | Retained Earnings | 4,600,000 | Total Assets | 7,100,000 | Total Liab. & Equity | 7,100,000 |
After executing this lease, Sandy Company’s long-term debt-to-equity ratio will: A) increase to 1.559. B) increase to 1.227. C) remain unchanged. D) increase to 1.521. The correct answer was D) Before entering into the lease, Sandy’s long term debt-to-equity ratio was ($1,700,000 / ($600,000 + $4,600,000) =) 0.327. The printing press lease is a capital lease because the lease period is at least 75 percent of the asset’s life (8 / 10 > 0.75). The minimum interest rate between the lease’s implicit rate (7%) and the lessee’s incremental borrowing rate (6%) is used to capitalize the lease. The present value of the lease payments is $6,209,794 (N = 8, I/Y = 6, PMT = 1,000,000, FV=0). This amount is added to the asset side as Net Leased Asset, and to the liabilities and equity side as Lease Liability. Sandy’s revised long-term debt-to-equity ratio is ($1,700,000 + $6,209,794) / ($600,000 + $4,600,000) = 7,909,794 / 5,200,000 = 1.521.
2.The Mader Corporation entered into a 5-year lease that requires payments of $10,000 per year. If the lease is classified as a capital lease, which financial statements are affected at the end of one period? A) Income statement only. B) Statement of cash flows and income statement only. C) Income statement and balance sheet only. D) Statement of cash flows, income statement, and balance sheet. The correct answer was D) The classification of a lease as a capital lease creates an asset, a debt obligation, financing cash flows (amortization of the loan), and operating cash flows (interest expense).
3.If a lease is capitalized, as compared to being treated as an operating lease, the effect on the current ratio and the debt/equity ratio will be: Current Ratio | Debt/Equity Ratio |
A) decrease decrease B) decrease increase C) increase decrease D) increase increase The correct answer was B) With capital leases the firm's assets, current liabilities, and long-term liabilities will be greater than if the lease was an operating lease. With the debt to equity ratio, the liability is in the numerator, which results in an increase in the ratio. With the current ratio, current liabilities are increased and are in the denominator which results in a decrease in the ratio.
4.On 31 December 2003, Zapp Company executed a 12-year lease with annual payments of $900,000 beginning 31 December 2004, for factory equipment. §
The economic life of the equipment was 18 years. §
The interest rate implicit in the lease was eight percent. §
Zapp’s incremental borrowing rate was 11 percent. §
Zapp may purchase the equipment at the end of the lease at the then-current fair market value of the equipment. §
The fair market value of the equipment at the inception of the lease was $8,000,000. Zapp’s Income Statement for the year ended 31 December 2004, is as follows (note that this statement is prepared under the assumption that the factory equipment lease was a capital lease): Sales | $22,000,000 | Cost of Goods Sold | (9,000,000) | Gross Profit | 13,000,000 | Depreciation on Lease | (565,206) | Other Depreciation | (2,900,000) | Sales and Administration | (2,600,000) | Operating Profit | 6,934.794 | Interest Expense on Lease | (542,838) | Other Interest Expense | (1,900,000) | Income Taxes | (2,000,000) | Net Income | $2,491,956 |
After considering whether the factory equipment lease should be reclassified as an operating lease and holding income taxes constant at $2,000,000, Zapp’s net profit margin will: A) decrease from 11.33 percent to 9.67 percent. B) increase from 11.33 percent to 15.42 percent. C) remain unchanged. D) increase from 11.33 percent to 12.27 percent. The correct answer was D) Zapp’s lease is classified as an operating lease, because it meets none of the four alternative criteria for classifying a lease as a capital lease: 1. There is no title transfer at the end of the lease. 2. There is no bargain purchase option 3. The lease period is not at least 75 percent of the asset’s life ((12 years / 18 years =) 67 percent). 4. The present value of the lease payments using an 8% interest rate, which is the minimum of the lessee’s incremental borrowing rate (11%) or the rate implicit in the lease (8%), is $6,782,470 (N=12, I/Y=8, FV=0, PMT=900,000, CPT PV). This is less than 90% of the value of the fair value of the asset ($6,782,470 / $8,000,000 = 84.8%). The 900,000 payment made 31 December 2004, was allocated ($6,782,470 × 0.08 =) $542,838 to interest and ($900,000 - $542,838 =) $357,162 to principal. Depreciation expense was computed over 12 years on a straight line basis ($6,782,470 / 12 =) $565,206. Adjusting the income statement to add back Depreciation on Lease and also to add back Interest on Lease and subtract Lease Expense results in net income of ($2,491,956 + $542,838 + $565,206 - $900,000 =) $2,700,000. The net profit margin (net income / net sales) then increases from ($2,491,956 / $22,000,000 =) 11.33 percent by the capital lease calculation to ($2,700,000 / $22,000,000 =) 12.27 percent by the operating lease calculation.
5.Capital leases have an effect on capital structure: A) similar to debt. B) similar to assets. C) similar to equity. D) capital leases have no effect on capital structure. The correct answer was A) Capital leases result in an increase in total assets and an increase in total liabilities. |
发表于 2008-4-22 10:06
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