You are studying with some classmates and are reviewing each others responses to the following question: Why
Question:
You are studying with some classmates and are reviewing each other’s responses to the following question:
“Why do companies lease equipment and what are the financial statement effects of leasing rather than borrowing and purchasing the equipment?”
Your classmate responds as follows:
“Companies lease equipment when they don’t have the money to buy it. If a company leases equipment, then the financial statement effects are exactly the same as they would have been if the company had borrowed the money and then bought the equipment.”
Required
Identify how your classmate’s answer could be substantively improved.
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Related Book For
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley
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