60 - • Lessee records “rent expense” when payments...

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Times-Interest-Earned Also called interest-coverage ratio Relates income to interest expense Times-Interest-Earned Also called interest-coverage ratio Relates income to interest expense Leases Lease–rental agreement in which the tenant (lessee) agrees to make rent payments to the property owner (lessor) Two categories: Operating Capital Operating Leases Usually short-term or cancelable Lessor retains risks and rewards of owning asset
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Unformatted text preview: • Lessee records “rent expense” when payments are made Capital Leases • Long-term noncancelable debt • Four criteria Title transfers to lessee at end of lease Lease contains a bargain purchase option Lease term is 75% or more of asset’s life Present value of lease payments is 90% or more than fair value of leased asset...
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