Capital leases would show up on the balance sheet of the firm in which manner for a six year machinery lease worth $700,000?
A) Capital leases do not have to be put on the balance sheet; only financial leases do.
B) Asset - Machinery $700,000; Liabilities - Long Term debt $700,000 because of debt displacement.
C) Asset - Assets under Capital Lease $700,000; Liabilities - Obligations under Capital Lease $700,000.
D) Assets - Assets under Capital Lease $700,000; Liabilities - Long Term Debt $700,000 because of debt displacement.
E) None of these.

Question

Quizplus · Accepted Answer

Capital leases are shown on the balance sheet as assets and liabilities. In this case, the asset will be shown as "Assets under Capital Lease" for the value of $700,000, and the liability will be shown as "Obligations under Capital Lease" also for the value of $700,000.

Capital Leases Would Show Up on the Balance Sheet of the Firm