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acct302gdb1 - balance-sheet financing"(Spiceland J.D...

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Requirement 1 : Wal-Mart could lease a premises rather than buy outright because of the uncertainty, time constraints, or/and bureaucratic control system. The time constraints could be that it takes longer to go through the process of buying than just signing a lease agreement. It could be that their bureaucratic control system prevents them form buying too many premises before knowing if it will be profitable. The uncertainty would be whether the company will thrive in any one area. The could have another retail chain that opens up and takes a portion of that stores business. The financing is costs less and the tax advantages available. This is also referred as "off-
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Unformatted text preview: balance-sheet financing". (Spiceland, J.D., Sepe, J.F. & Nelson, MW. (2011)). Requirement 2: The property is "under Capital lease" is an investing/financing activity where cash is not used. The property is amortized expense is calculated from the date of the lease and is accumulated system subtracted from the asset. The liability portion of the lease than uses cash to pay for the lease property. Requirement 3: Capital Lease Interest Expense 115M Lease Payable 315M Cash 603M Reference Spiceland, J.D., Sepe, J.F. & Nelson, MW. (2011). Intermediate Accounting (6th ed.). Boston, MA: McGraw-Hill/Irwin....
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