IV.LeasesWhat are the differences betweenoperating and capitalleases?Describe theparticularleases of...

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IV.LeasesWhat are the differences betweenoperating and capitalleases?Describe theparticularleases of your company based on the liability section of your company's balance sheet.What impact have the leases had on the company's financial statements for the most recent year?Discuss the advantages and disadvantages of leasing abuildingversus purchasing one.VI.Statement of Changes in Financial PositionFrom the perspective of an investor, determine whether or not you wouldinvestin your chosen company based on the company's statement of changes in financial position (SCFP). Support your opinion.Review the company's SCFP for any concerns that may need to be addressed. As controller of your company, prepare a memo to your CEO, giving a summary report for possible recommendations.

Shakeel · Accepted Answer

IV: Leases
1. Differences between Operating and Capital lease are as follows –
· In Operating lease, ownership of assets is retained by the lessor while in the case of Capital lease, ownership of assets may be transferred to the lessee at the end of lease term. 
· If lease term is less than 75% of the useful life of the assets, then it is classified as operating lease otherwise it is classified as Capital lease.
· In operating lease, the present value of lease rental is less than 90% of the fair market value while in the case of Capital lease, it is more than 90%.
· In Operating lease, all the risk and benefits lie with lessor only. Lessee only uses the assets. While, in the case of Capital lease, risk and benefits are also transferred to the lessee.
· In Operating lease, rental payment is considered as operating expenses while in Capital lease, lessee is considered as owner of the assets and therefore, he can claim depreciation and interest expenses.
2. Cotsco ltd has both kind of lease – Operating lease and Capital lease. The Company leases land and/or buildings at warehouses and certain other office and distribution facilities, primarily under operating leases that expires at various dates through 2064. Company has also capital leases for certain warehouse locations, expiring at various dates through 2059. Capital lease assets are included in land and buildings and improvements in the accompanying consolidated balance sheets. 
3. The lease rental on Capital lease has always higher than Operating lease.

IV.Leases What are the differences betweenoperating and capitalleases? Describe theparticularleases of your company based on the liability section of your company's balance sheet. What impact have the...

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