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Financial Accounting

Determining the effect of transactions on accounts. See attached file for full problem description.

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Please see my answers below. Please keep in mind that the name of the accounts can vary depending on which company you are working at, but the basic idea remains the same.

Step 1
Use the tables below to display the requested information for this task. The number of rows in each table is not indicative of the number of accounts affected. Feel free to add or remove rows as necessary.

Which accounts are affected by the lease payment for a lease that is classified as an operating lease? Assume even lease payments over the term of the lease.
Account affected Increase or decrease?
Rental Expense Increase
Cash & Cash Equivalents Decrease
Accounts Payable (if not paid in cash) Increase

How is the balance sheet affected by the lease payment for a lease that is classified as an operating lease? Assume even lease payments over the term of the lease.
Account affected Increase or decrease?
Cash Decrease
Accounts Payable (if not paid cash) Increase

How is the income statement affected by the lease payment for a lease that is classified as an operating lease? Assume even lease payments over the term of the lease.
Account affected Increase, decrease, or no change?
Rental Expense Increase

How is the statement of cash flows using the direct method affected by the lease payment for a lease that is classified as an operating lease? Assume even lease payments over the term of the lease.
Operating Activities - list event Cash inflow, cash ...

Solution Summary

The solution determines the effect of transactions on accounts.

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