Fish and Chips Case Study

20-13 Fish & Chips Inc., Part I drive Analysis A. 1.If an asset is purchased, it mustiness be shown on the left-hand stead of the proportionality sheet, with an offsetting debt or right entry on the rightfield side. However, if an asset is leased, and if the lease is non classified ad as a outstanding lease, then it does non have to be shown directly on the balance sheet, but, rather, must only be reported in the footnotes to the caller-outs financial statements. A. 2.Capital leases be differentiated from operating leases in three respects: (1) they do not provide for alimony service, (2) they ar not cancelable, and (3) they are goody amortized. (That is, the lessor receives rental payments that are equal to the full set of the leased computer abstract plus a egest on the investment.) A. 3.Leasing is a stand-in for debt financinglease payments, deal debt payments, are contractual obligations that if not met will force the lactating into bankruptcy. Thus, leasing uses up a degenerates debt capacity. To illustrate, if Fish & Chips optimum capital structure is 50% debt and 50% equity, and if the firm leases half(prenominal) its assets, then the other half should be financed by commonalty equity. B. 1.In pronounce to unsex the cost of owning, it is first necessary to fashion a depreciation instrument. This roll is given below. disparagement schedule: depreciable basis = $1,200,000.

| |MACRS |Depreciation |End-of- form | |Year |Rate |Expense | keep back Value | |1 |0.33 |$ 396,000 |$804,000 | |2 |0.45 |540,000 |264,000 | |3 |0.15 |180,000 |84,000...If you want to meet a full essay, order it on our website: Orderessay

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