ACCT 001A Lecture Notes - Lecture 24: Moe Williams, Operating Lease, Investment Banking
7 Jan 2021
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Capital lease: asset and liability are recorded on balance sheet - at present value of future payments. m building is purchased > m asset, m liability > can affect ability to borrow money in the future due to large liability sum, despite the offset asset line item. Therefore companies lease assets to avoid large liability amounts. Fasb ruled if the lease term is more than 1 year, it must be capitalized. Comes from the difference between taxable income (income statement) vs. taxable income for the irs. Interest received from municipal bonds purchased, treated as revenue on income statement. Congress wants to promote investment in municipal bonds, so they don"t tax it, and wont appear as revenue. Depreciation is a common item contributing to deferred taxes. Method of borrowing large amounts of money by borrowing from the general public (instead of bank). When redeemed by bondholders, the company must pay the principal amount (face amount)
