MicroEconomics
EXERCISES
Exercise 3-1 (20 minutes)
a. Long-term debt [46]
A 13.99
B 9.125
G -9.7
H
805.8 beg
7.5 C
9.0 D
-0.17 E
8.875 F
14.8 I
772.6 end
A = Retirement of 13.99% Zero Coupon Notes.
B = Repayment of 9.125% Note.
C = Additional borrowing on 7.5% Note.
D = Borrowing on 9% Note
E = Borrowing on Medium-Term Notes.
F = Borrowing on 8.875% Debentures
G = Repayment of Other Notes
H = Reclassification of Note
I = Increase in capital lease obligation
b. Please provide a 1-2 paragraph explanation.
Exercise 3-2 (20 minutes)
a. The effects of a long-term capital lease on a lease are much like that of equipment purchases using installment payment debt. This type of lease transfers all the benefits and risks to the ownership is accounted for as an asset and liability incurrence by the lessee. If a lease is classified as capitalized, both the leased asset and the lease obligation are recognized on the balance sheet.
b. A lessee account for a capital lease if at its inception the lease meets any four criteria; the lease transfers ownership of property to the lease by the end of the lease term ,the lease contains an option to purchase the property at a bargain price, the lease is 75% or more the estimated economic life of the property or If the present value exceeds the fair value of the leased property or items at the inception of the lease, the amount that was recorded for the asset should be the fair value.
c. with a lease being classified as capital, the lessee records it both as an asset and liability at the amount equal to the present value of the minimum lease payment over the lease term. The asset must depreciate in a manner consistent with the
Exercise 3-1 (20 minutes)
a. Long-term debt [46]
A 13.99
B 9.125
G -9.7
H
805.8 beg
7.5 C
9.0 D
-0.17 E
8.875 F
14.8 I
772.6 end
A = Retirement of 13.99% Zero Coupon Notes.
B = Repayment of 9.125% Note.
C = Additional borrowing on 7.5% Note.
D = Borrowing on 9% Note
E = Borrowing on Medium-Term Notes.
F = Borrowing on 8.875% Debentures
G = Repayment of Other Notes
H = Reclassification of Note
I = Increase in capital lease obligation
b. Please provide a 1-2 paragraph explanation.
Exercise 3-2 (20 minutes)
a. The effects of a long-term capital lease on a lease are much like that of equipment purchases using installment payment debt. This type of lease transfers all the benefits and risks to the ownership is accounted for as an asset and liability incurrence by the lessee. If a lease is classified as capitalized, both the leased asset and the lease obligation are recognized on the balance sheet.
b. A lessee account for a capital lease if at its inception the lease meets any four criteria; the lease transfers ownership of property to the lease by the end of the lease term ,the lease contains an option to purchase the property at a bargain price, the lease is 75% or more the estimated economic life of the property or If the present value exceeds the fair value of the leased property or items at the inception of the lease, the amount that was recorded for the asset should be the fair value.
c. with a lease being classified as capital, the lessee records it both as an asset and liability at the amount equal to the present value of the minimum lease payment over the lease term. The asset must depreciate in a manner consistent with the