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

question 9

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.
• E) None of these.

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