Which of the statements is most correct?Select one:a. Some years ago leasing was called "off balance sheet financing" becausethe leased asset and the corresponding lease obligation did not appeardirectly on the balance sheet. Today, though, the situation has changedmaterially because all types of lease must be capitalized and reported onthe balance sheet, along with the value of the leased asset.O b. In a lease-versus-purchase analysis, cash flows should generally bediscounted at the WACC.O . Each of the statements is true.O d. Each of the statements is false.

Lease can be of two types. Operating lease Finance Lease Finance Lease is a lease wherein all…

Answered: and the corresponding lease obligation…

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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Which one of the following definitions is/are correct? I. A lease between a lessor and the manufacturer of the leased asset is a direct lease. I. A leveraged lease is where the lessor has borrowed about 80% of the asset's cost while the lender owns the asset. I. The lessor is the party which uses the leased asset. IV. A financial lease is a capital cancellable contractual agreement between two parties. V. A sale and leaseback is the sale of an asset by Firm A to Firm B followed by the lease of that asset by Firm C. Select one: O a. I and Il only O b. Il only O . I, Il and IV only O d. I. only O e. Il and IV only
Explain Nonlease Components of Lease Payments.
Generally operating leases are fully amortized, and the lease is written for the expected life of the asset. Select one: True False
Under US GAAP, It is possible that the lessor changes the lease classification from operating lease to sale-type ( or the other way around) when the lease term is modified. O True O False
A lease agreement will qualify as a finance lease if one of these conditionsoccur: A. The lessee returns the leased property to the lessor at the end of the lease term.B. The lease does not have a bargain purchase option.C. The lease term is for major of the economic life of the asset.D. The present value of the minimum lease payment amounts to substantially less than the fair value of the leased asset.
When a lease qualifies as a finance lease, what amount is initially recorded as the cost of the right-of-use asset? A) The present value of the lease payments B) The sum of the gross (undiscounted) lease payments. O A O B « Previous Next Not saved Submit Quiz
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What is included in the value of the lessor's lease receivable? (l) O the lease payment plus the present value of a guaranteed residual value O the lease payments only O the lease payment plus the present value of an unguaranteed residual value O the lease payments plus the present value of any residual value )
On the balance sheet, the lease liability is measured as ________. Group of answer choices the present value of the lease payments less the present value of the guaranteed residual value (if any) the present value of the lease payments plus the future value of the guaranteed residual value (if any) the present value of the lease payments plus the present value of the guaranteed residual value if the lessee guarantees it(if any) the future value of the lease payments plus the future value of the guaranteed residual value (if any)
A lessee should classify a lease transaction as a finance lease if it is noncancelable and one or more of the five classification criteria are met. Otherwise, it is an operating lease. What are these criteria? Provide 2-3 reasons why a company would choose to lease an asset versus purchasing?
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The answer is incorrect. Can you at least calculate the value of the lease liability at the commencement in the lease?

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and the corresponding lease obligation did n malance sheet. Today, though, the situation ha ise all types of lease must be capitalized and r et, along with the value of the leased asset.