Accounting Chapter 15.4

True or False The current maturities of long-term debt should be reported under current liabilities if they are to be paid from current assets.

True

Where does the "capital lease" name come from

a company capitalizes the present value of the cash payments for the lease and records that amount as an asset

Conditions in which the lessee must record a lease as an asset

1. The lease transfers ownership of the property to the lessee 2. The lease contains a bargain purchase option 3. The lease term is equal to 75% or more of the economic life of the leased property 4. The present value of the lease payments equals or exceeds 90% of the fair value of the leased property

capital lease

A contractual arrangement that transfers substantially all the benefits and risks of ownership to the lessee so that the lease is in effect a purchase of the property.

Debt to assets ratio

A solvency measure that indicates the percentage of total assets provided by creditors; computed as total liabilities divided by total assets.

True or False Long-term liabilities are reported in a separate section of the balance sheet immediately following current assets.

False Long-term liabilities are reported in a section of the balance sheet immediately following current liabilities

True or False The nature and amount of each long-term debt should not be reported in the balance sheet or in schedules in notes accompanying the statements.

False they should

lessee vs lessor

The lessee pays rent to the landlord. The lessor receives payment from the tenant.