If the property were owned outright this difficulty

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Unformatted text preview: ty were owned outright, this difficulty would not arise. Of course, lessors generally encourage leasehold improvements when these are expected to enhance the asset’s salvage value. 4. If a lessee leases an asset that subsequently becomes obsolete, it still must make lease payments over the remaining term of the lease. This is true even if the asset is unusable. Review Questions 16–2 What is leasing? Define, compare, and contrast operating leases and financial (or capital) leases. How does the Financial Accounting Standards Board (FASB) Standard No. 13 define a financial (or capital) lease? Describe three methods used by lessors to acquire assets to be leased. 16–3 Describe the four basic steps involved in the lease-versus-purchase decision process. How are capital budgeting methods applied in this process? 16–4 What type of lease must be treated as a capitalized lease on the balance sheet? How does the financial manager capitalize a lease? 16–5 List and discuss the commonly cited advantages and disadvantages that should be considered when deciding whether to lease or purchase....
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This document was uploaded on 01/19/2014.

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