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

question 50

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 the above.

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Definitions:

Operating Activities

Activities that relate to the company's primary operations, including revenue generation, expenses, and cash flows.

Cash Dividends

Cash distributed by a corporation to its shareholders out of its earnings.

Net Cash

The amount of cash that remains after accounting for cash disbursements and receipts, indicating a company's liquidity position.

Operating Activities

Activities that constitute the primary or main activities of a business, like sales, provision of services, production, etc., which are reflected in the cash flow from operating activities in the financial statements.