21. If a firm only has Deferred Tax Assets then a decrease in tax rates will: A)

Question

21. If a firm only has Deferred Tax Assets then a decrease in tax rates will: A) increase total assets B) increase shareholders' equity C) increase tax expense associated with DTA of the following debt covenants would make a firm (the lessee) prefer to structure its leases as operating leases rather than finance leases? Consider the early years of the lease. A) The firm cannot pay dividends in excess of $2 million during any fiscal year 8) The firm's debt-to-equity ratio cannot exceed 1.5 at any quarter-end during the fiscal year The firm must maintain Cash Flow of Operations of no less than $4.25 at any quarter-end during t fiscal year A firm that reports under GAAP leases a fixed asset. The asset's economic life is 8 years. The expected asset value at the end of the pr 200,000. Which of the following is most accurate? A) If the original term of the lease is five years, then this would be considered a finance/capital lease B) If the lease allows the lessee to purchase the asset for $30,000 at the end of the lease term this 23. oposed lease term is $25,000. The fair value of the leased asset is would be considered a finance/capital lease If the present value of the lease payments is $182,000 this would be considered a finance/capital lease C)

Explanation / Answer

1. Increases the Stockholders' Equity.

A decrease in the tax rate will reduces the Income tax expenses and increases the net income and increases the stockholder's equity

2. Option B;

if a Lessee takes Finance Lease it will be reported as an increase to debt in the Balance sheet which will increases debt equity ratio

3. Option B;

One of the main Characteristic of Finance Lease is that the lessee is allowed to purchase the asset at the end of lease period.

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