What will Luther's balance sheet look like if they acquire the new fleet of delivery trucks using an operating lease?
What will be an ideal response?
Answer: If the firm acquires the fleet through an operating lease, there is no change in the original balance sheet. The fleet is not listed as an asset and the lease is not view as a liability. The transaction is off-balance sheet and will be disclosed in a footnote. Therefore, Luther's balance sheet will look like:
Assets Liabilities
Cash $500 Debt $4,500
Property, Plant, and Equipment $7,000 Equity $3,000
Total Assets $7,500 Total Debt plus Equity $7,500
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"All debits are increases and all credits are decreases." Is this a correct statement? Explain your answer
What will be an ideal response
An alternative hypothesis is a statement of the status quo, one of no difference or no effect
Indicate whether the statement is true or false