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II. Management BriefA capital lease is a long-term lease. In the scenario, monthly lease payment of $ 20,000,term of lese is 6 years and interest rate are 5%, then after 6 years, the total capital leaseobligation of $ 101,513.82 (please see the detailed on workbook). Peyton Approved wouldrecord the remaining lease payments as a liability and the equipment as an asset. Meanwhile,Peyton Approved need to deduct the interest portion of the financing as interest expense anddepreciation of the equipment as depreciation expense. Because expenses reduce net income, acapital lease can result in lower taxes than an operating lease.Peyton Approved will now provide health insurance to retired employees. Regardless ofshort-term or long -term, these pensions plan are a type of off-balance-sheet financing.Forshort-term accounting, if pension liability excludes health insurance liability and for 60