(CFO) of Southwest Airlines. Southwest leases some of its planes. Suppose the leases can be structured either as operating leases or as capital leases. Which type of lease would you prefer for Southwest? Why? Consider what would happen to Southwest s debt ratio if its operating leases in footnote 8 were capitalized‚ and the related liabilities recognized. Computing Southwests debt ratio two ways (operating leases versus reclassifying them as capital leases) will make your decision clear (using Southwest
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HOUSE LEASE THIS LEASE made as of -August 1‚2010-------------------BETWEEN ---Gregorio &Editha Andrada------------------------(THE LANDLORD) and ---Mary Jane Duyag-------------------------------------------------(THE TENANT). LEASE.The Landlord leases to the Tenant 7208 Beakrush Lane‚Winter Garden‚Florida 34787(the Premises) for a term of beginning on August 1‚2010 and ending on August 1‚2011(the term).Any occupancy by the Tenant of the Premises shall be subject to the
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ACCOUNTING FOR LEASES IFRS questions are available at the end of this chapter. TRUE-FALSe—Conceptual Answer No. Description T 1. Benefits of leasing. F 2. Accounting for long-term leases. F 3. Classifying lease containing purchase option. T 4. Accounting for executory costs. F 5. Depreciating a capitalized asset. F 6. Lessee recording of interest expense. T 7. Benefit of leasing to lessor. F 8. Distinction between direct-financing and sales-type leases. F 9. Lessors’ classification
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July 18‚ 2011 3 Subject: Leases and Lease Structure Issues 4 To: Regional Trucking Company 5 From: Bob Stanton This memo will cover the current practice and thought related to direct financing‚ sales type‚ and operating leases. I understad that Regional Trucking Company have limited time to cover all aspects of these areas. Disclosure Requirements for Capital Leases SFAS No. 13 also requires the disclosure of additional information for capital leases. The following information must
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investment banking‚ commercial banking‚ venture capital‚ insurance‚ credit rating‚ bill discounting‚ and mutual funds ‚ stock broking‚ housing finance‚ vehicle finance‚ mortgages and car loans‚ factoring among other things. Various entities that provide these services are basically categorized into (a) Non –Banking Finance Companies (b) Commercial Banks‚ and (c) Merchant Banks. Financial Services in India is too vast and varied too have evolved at one place and at one
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To Buy or to Lease? The Risk. Malaysia Airlines decision to lease whether a capital or operating rather than buying the asset arise because of the risk decision and the decision made in the upper management. When making the decision to buy or to lease the company must not only consider the financial implications of the options including the value of the money but consideration must also be given to long-term strategic priorities. It is important to understand the implications and the risks posed
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Operating leases are similar to renting‚ while capital leases are more like a loan. Capital leases are where a lessor transfers all the risks and benefits of ownership for a property to the lessee. An operating lease does the opposite and does not transfer all the risks and benefits to the lessee. In addition to transferring risks and benefits‚ there are other qualifications to be classified as a capital lease. The lease must contain a bargain purchase option. It has to be equal to 75% or more of
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Leasing Option Memo for Client Elizabeth P Grady ACC 541 December 5‚ 2011 Leslie Crews Memorandum to: Client from: Elizabeth Grady‚ Staff 1 subject: Leasing options memo date: december 5‚ 2011 ------------------------------------------------- Each year the number of leasing agreements continues to grow. There are several advantages of leasing property instead of owning. The company is protected against obsolescence and can receive 100% financing with less cost‚ fixed payments
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Capital Leases vs. Operating Leases - What’s the Difference? Which One Should I Use for Equipment Leasing? Leasing equipment is a common alternative to purchase. Of the two kinds of leases - capital leases and operating leases - each is used for different purposes and results in differing treatment on the accounting books of a business. Capital Leases •Capital leases are used for long-term leases and for items that not become technologically obsolete‚ such as many kinds of machinery.
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volume of transactions. Although this type of financing can be for long term‚ most lease financing is for periods of less than ten years. Under the subject of finance our concern is with financial leases rather than with operating leases. Hence we will study here about the financial lease. A lease is a means by which a firm can acquire the economic use of an asset for a specific period of time. A financial lease is a non canceleable contractual commitment on the part of a lessee to make a series
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