Reading 40: Leases and Off-Balance-Sheet Debt - LOS b ～ Q

答案和详解如下：

6.Under a capital lease (versus an operating lease) which financial ratio will be higher?

A)   Asset turnover.

B)   Return on assets.

C)   Return on equity.

D)   Debt/equity.

The correct answer was D)

The debt/equity ratio will be higher because the capital lease requires the creation of a long-term liability on the balance sheet.

7.Under an operating lease (versus a capital lease) which of the following will be higher?

A)   Cash flow from operations

B)   Cash flow from financing.

C)   Liabilities.

D)   Assets.

The correct answer was B)

The cash flows from financing will be higher for an operating lease because the payments made for an operating lease are charged to income and operating cash flow, not financing cash flow. The payments made under a capital lease are split between interest paid and principal. The latter is charged to cash flow from financing.

8.The principal associated with a capital lease payment is charged to:

A)   income.

B)   investing cash flow.

C)   financing cash flow.

D)   operating cash flow.

The correct answer was C)

The principal associated with a capital lease payment is charged to financing cash flow. The interest expense associated with capital leases is charged to income and operating cash flow.

9.Kachelmeyer, Inc., signs an agreement on 1 January 2005, to lease equipment from Henderson Company. The term of the lease is five years, and the estimated economic life of the asset is also five years. The agreement requires equal annual payments of $36,285.90, with the first payment on 1 January 2005. Kachelmeyer’s incremental borrowing rate is 12 percent. Henderson’s implicit rate is 10 percent and is known to Kachelmeyer. The prime rate is 8 percent.

The discount rate that Kachelmeyer should use to capitalize the lease is:

A)   8%.

B)   12%.

C)   10%.

D)   Can choose any of the above rates, as long as Kachelmeyer can justify it to its auditors.

The correct answer was C)

The lower of the lessee’s incremental borrowing rate or the lessor’s implicit rate, if know to the lessee is used as the discount rate. Hence, 10 percent is the correct answer. The prime rate is inconsequential for this problem.

10.The amount at which Kachelmeyer should capitalize the lease on 1 January 2005, is closest to:

A)   $151,307.

B)   $146,499.

C)   $137,552.

D)   $130,803.

The correct answer was A)

Set the calculator to BGN, then: PMT = 36,285.9; n = 5; I/Y = 10; CPT → PV = $151,307