Capital Leases Would Show Up on the Balance Sheet of the Firm

question 23

Multiple Choice

Capital leases would show up on the balance sheet of the firm in which manner for a six year machinery lease worth $700,000:

• A) capital leases do not have to be put on the balance sheet only financial leases do.
• B) Asset-Machinery $700,000; Liabilities-Long term debt $700,000 because of debt displacement.
• C) Asset-Assets under capital lease $700,000; Liabilities-Obligations under capital lease $700,000.
• D) Assets-Assets under capital lease $700,000; Liabilities-Long term debt $700,000 because of debt displacement.

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Definitions:

Prediction Error

The difference between an observed value and the value predicted by a model.

Linear Regression

A statistical method for modeling the relationship between a dependent variable and one or more independent variables.

Correlations

A numerical value representing the level at which multiple variables co-vary.

Slope

The measure of the steepness or incline of a line, describing both its direction and its steepness.