Acme Distribution currently has the following items on its balance sheet (Smilli

Question

Acme Distribution currently has the following items on its balance sheet (Smillion): How will Acme's balance sheet change if it enters into an $78 million capital lease for new warehouses? What will its book debt-equity ratio be? How will Acme's balance sheet and debt-equity ratio change if the lease is an operating lease? Acme's new balance sheet will be: (Round to the nearest dollar.) What will its book debt-equity ratio be? The book debt-equity ratio will be (Round to two decimal places.) How will Acme's balance sheet and debt-equity ratio change if the lease is an operating lease? Acme's new balance sheet will be: (Round to the nearest dollar.)

Explanation / Answer

The lease amount taken will be added to the debt Total Debt = 65+78 143 Balance Sheet Assets Liabilities Cash 16 Debt 143 Property, Plant & Equipment 258 Equity 131 274 274 Debt Equity Ratio 143/131 1.09160305 If the lease is an operating lease it will not effect the balance sheet debt Debt Equity Ratio will be 65/131 0.49618321 The lease amount taken will be added to the debt Total Debt = 65+78 143 Balance Sheet Assets Liabilities Cash 16 Debt 143 Property, Plant & Equipment 258 Equity 131 274 274 Debt Equity Ratio 143/131 1.09160305 If the lease is an operating lease it will not effect the balance sheet debt Debt Equity Ratio will be 65/131 0.49618321

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