20-13 Fish & Chips Inc., Part I Lease Analysis A. 1.If an incontrovertible is purchased, it mustinessiness be shown on the left-hand side of the rest sheet, with an offsetting debt or truth entry on the right-hand side. However, if an addition is leased, and if the lease is non classified as a capital lease, then it does non have to be shown directly on the balance sheet, but, rather, must only be reported in the footnotes to the companys financial statements. A. 2.Capital leases argon differentiated from operating leases in tercet respects: (1) they do not provide for sustentation service, (2) they are not cancelable, and (3) they are goody amortized. (That is, the lessor receives rental payments that are enough to the full price of the leased computer schema plus a return on the investment.) A. 3.Leasing is a fireman for debt financial supportlease payments, like debt payments, are contractual obligations that if not met allow for force the crocked in to bankruptcy. Thus, leasing uses up a firms debt capacity. To illustrate, if Fish & Chips optimal capital structure is 50% debt and 50% equity, and if the firm leases half its assets, then the other half should be financed by common equity. B. 1.In order to unsex the cost of owning, it is maiden necessary to construct a depreciation schedule. This schedule is effrontery below. disparagement schedule: depreciable basis = $1,200,000.
| |MACRS |Depreciation |End-of-Year | |Year | set ! |Expense |Book Value | |1 |0.33 |$ 396,000 |$804,000 | |2 |0.45 |540,000 |264,000 | |3 |0.15 |180,000 |84,000...If you want to get a full essay, order it on our website:
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