INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 19, Problem 11PS
Summary Introduction
To determine the most likely motivation behind management of Hartfiled Industries decision to change accounting methodology.
Introduction:
A change in accounting methodology means a change in accounting principles, accounting estimates or reporting entity.
If a lease payment is classified as operating expense it does not reflect as a part of capital of the firm while if the lease is classified as capital lease, the
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Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets, or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions:
a. What are the possible advantages of leasing the assets instead of owning them?
b. What are the possible disadvantages of leasing the assets instead of owning them?
c. How will the balance sheet be different if Bradley Co. leases the assets rather than purchasing them?
Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions:
a. What might be the advantages of leasing the assets instead of owning them?
b. What might be the disadvantages of leasing the assets instead of owning them?
c. In what ways will the Statement of Financial Position be differently affected by leasing the assets as opposed to issuing bonds and purchasing the assets?
Barnes plans to use the preceding ratios as the starting point for discussions with SKI’s
operating executives. He wants everyone to think about the pros and cons of changing each type of current asset and how changes would interact to affect profits and EVA. Based on the data, does SKI seem to be following a relaxed, moderate, or restricted working capital policy?
Chapter 19 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 19 - Prob. 1PSCh. 19 - Prob. 2PSCh. 19 - Prob. 3PSCh. 19 - Prob. 4PSCh. 19 - Prob. 5PSCh. 19 - Prob. 6PSCh. 19 - Prob. 7PSCh. 19 - Prob. 8PSCh. 19 - Prob. 9PSCh. 19 - Prob. 10PS
Ch. 19 - Prob. 11PSCh. 19 - Prob. 12PSCh. 19 - Prob. 13PSCh. 19 - Prob. 14PSCh. 19 - Prob. 15PSCh. 19 - Prob. 16PSCh. 19 - Prob. 1CPCh. 19 - Prob. 2CPCh. 19 - Prob. 3CPCh. 19 - Prob. 4CPCh. 19 - Prob. 5CPCh. 19 - Prob. 6CPCh. 19 - Prob. 7CPCh. 19 - Prob. 8CPCh. 19 - Prob. 9CPCh. 19 - Prob. 10CPCh. 19 - Prob. 11CPCh. 19 - Prob. 12CPCh. 19 - Prob. 13CP
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