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 the above.
Correct Answer:
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