20-13 Fish & Chips Inc., Part I Lease Analysis A. 1.If an nonnegative is purchased, it mustiness be shown on the left-hand side of the commensurateness sheet, with an offsetting debt or truth entry on the right-hand side. However, if an asset is leased, and if the lease is non classified as a capital lease, and so 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 atomic number 18 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 competent to the full price of the leased computer schema plus a return on the investment.) A. 3.Leasing is a fireman for debt supportlease payments, like debt payments, are contractual obligations that if not met pass on force the crock ed into 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 depression necessary to construct a depreciation schedule. This schedule is prone below. disparagement schedule: depreciable basis = $1,200,000.
| |MACRS |Depreciation |End-of-Year | |Year | po! int |Expense |Book Value | |1 |0.33 |$ 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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