Hayes Corp. is a manufacturer of truck trailers. On January 1, 2011, Hayes Corp. leases ten
trailers to Lester Company under a six-year noncancelable lease agreement. The following
information about the lease and the trailers is provided:
1. Equal annual
T1. Leasing equipment reduces the risk of obsolescence to the lessee, and passes the risk of
residual value to the lessor.
F2. The FASB agrees with the capitalization approach and requires companies to capitalize
all long-term leases.
F3. A lea
F1. A pension plan is contributory when the employer makes payments to a funding agency.
T2. Qualified pension plans permit deductibility of the employers contributions to the pension
F3. An employer reports no liability on its balance sh
F1. Taxable income is a tax accounting term and is also referred to as income before taxes.
F2. Pretax financial income is the amount used to compute income tax payable.
T3. Taxable amounts increase taxable income in future years.
T4. A deferre