Leases of short-term assets are operating leases, and leases of long-term assets are capital leases.
22.A capital lease is a lease of property, plant, or equipment that is in effect an installment purchase.
23.Accounting for capital leases can be thought of as similar to accounting for mortgage payments.
24.When a monthly mortgage payment is made and recorded, the debit to Mortgage Payable represents the reduction in the principal balance.
25.Under a defined contribution pension plan, retirement benefits are based entirely on the annual contribution to the fund plus earnings thereon.
26.Accounting for a defined benefit pension plan is simpler than accounting for a defined contribution plan.
27.Costs of postretirement benefits other than pension plans should be expensed when paid to the retired employee.
28.A capital lease represents both an asset and a liability to the lessee.
29.As the interest coverage ratio declines, the risk for creditors also declines.
30.Financial leverage refers to the issuance of stock to raise cash.
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