Chapter 18, Problem 1FSAC

a.

To determine

The effect on the financial statement of operating lease and capital lease on the balance sheet and income statement and explain the financial statement effect of capitalizing operating expenses.

b.

To determine

To prepare: The journal entries to reflect the scheduled payment during fiscal 2015 for operating and capital in place of fiscal 2014.

c.

To determine

The average interest rate on capital lease.

Given information:

Interest expense is $277.

Present value of future minimum lease payments is $3,094.

d.

To determine

To Prepare: The journal entry to record the capitalization of leases.

d.

To determine

The amount of interest expense and depreciation.

f.

To determine

The changes in assets, liabilities, and equity if all the operating leases has capitalized and also find the debt to equity ratio and total liabilities to total assets ratio and explain if operating leases capitalize the debt to equity ratio and total liability to total asset ratio.

g.

To determine

The change in the fiscal net income 2014.