You Are Analyzing the Balance Sheet of a Large Manufacturing

question 48

Essay

You are analyzing the balance sheet of a large manufacturing company and come across the following account in the property,plant and equipment section: The footnotes indicate that the lease was signed three years ago,that there are several years left in the finance lease,and that the equipment reverts to the lessor at the end of the lease term.The reporting company does not use the accumulated depreciation account for assets under finance leases.
Explain (a)what this account and (b)amount means,and (c)how it came to be included as a long-term asset.
(a)The account came about through capitalizing the present value of the future cash flows expected under the lease.

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Definitions:

Limbic System

An intricate network of nerves and brain regions close to the cortex's boundary, responsible for managing instinct and mood, encompassing various areas. This system regulates fundamental emotions such as fear, pleasure, and anger, as well as primary drives including hunger, sexual desire, dominance, and parental care.

Hormonal Imbalances

A condition where there is too much or too little of a hormone in the bloodstream, often resulting in disruption of bodily functions and processes.

Corpus Callosum

A large band of nerve fibers connecting the left and right hemispheres of the brain, facilitating interhemispheric communication.

Right-Handed

Preferring to use the right hand for most activities, especially intricate tasks like writing or eating.