Current Generally Accepted Accounting Principles Do Not Require Operating Leases

question 73

Essay

Current generally accepted accounting principles do not require operating leases to be shown on the balance sheet.Consider the case of Barren Company.If the operating leases of Barren Company were added to the company's liabilities at December 31,2014,the company's current ratio would decline from 0.69 to 0.57 and total debt would increase from $239 million to $1,105 million.Significant changes would also occur in the return on assets since assets would be increased and the related increase in depreciation and interest expense would exceed the rent expense currently included in the company's income statement.
Required:

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Definitions:

Guard Cells

Specialized cells in the epidermis of leaves, stems, and other organs that regulate gas exchange and water loss by opening and closing stomata.

Stoma

A tiny opening or pore, found in the epidermis of leaves and stems, that is used for gas exchange.

Parenchyma

A type of plant tissue composed of living cells, often the most abundant type of cell in plants, involved in photosynthesis, storage, and regenerative processes.

Axil

The angle or area between the upper side of a leaf or stem and the supporting stem or branch.