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In the year ended 31 December 20X7, FG leased a piece of machinery. The accountant of FG had prepared the financial statements for the year to 31 December 20X7 on the basis of the lease being an operating lease.
However, following the end of year audit it has been agreed that the machinery is in fact held under a finance lease and therefore the financial statements need to be corrected.
Thecorrection will have which THREE of the following affects on the financial statements?
Suggested Answer: B
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31 comments · newest first
CA
Caitlin
11 months ago
I thought depreciation costs would stay the same?
JA
James
11 months ago
Current liabilities will definitely increase too.
CO
Corinne
11 months ago
Wait, are we sure about the finance costs increasing?
SO
Son
12 months ago
Totally agree, that’s how finance leases work!
TA
Talia
12 months ago
Non-current assets will increase.
TI
Tiera
1 year ago
I thought non-current liabilities would increase as well, but I'm not sure if they decrease or stay the same. This is confusing!
HA
Haley
1 year ago
I practiced a similar question where current liabilities increased due to the lease obligation being recognized. I think that applies here too.
RO
Royal
1 year ago
I'm a bit unsure about the finance costs. I think they might increase because of the interest component in the lease payments, but I need to double-check that.
TY
Ty
1 year ago
I remember that with a finance lease, the asset is recognized on the balance sheet, so non-current assets will definitely increase.
GL
Glynda
1 year ago
I'm pretty confident on this one. The key changes are that the non-current asset will increase, finance costs will increase, and current liabilities will increase. The other options don't seem relevant to the change in lease classification.
MA
Major
1 year ago
This is a tricky one. I'll need to review the accounting standards on finance leases to make sure I fully understand how the financial statements will be impacted. Gotta be careful not to miss any of the key effects.
YE
Yen
1 year ago
Hmm, I'm a bit confused. If the lease is now classified as a finance lease, wouldn't that also impact the finance costs and depreciation? I'll need to think through the full implications carefully.
AR
Arlen
1 year ago
This seems straightforward - the lease is now classified as a finance lease, so the machinery will need to be recognized as a non-current asset, and the corresponding liability will increase current and non-current liabilities.
RO
Roy
1 year ago
Okay, I think I've got it. The non-current asset will increase, finance costs will increase, and current liabilities will increase. The other options don't seem to logically follow from the change in lease classification.
CL
Clorinda
1 year ago
Okay, let me think this through step-by-step. RSTP is all about determining the root bridge, and that's based on the bridge-id, which is a combination of the priority and the MAC address. The switch with the lowest bridge-id becomes the root. I'm pretty sure that's the right approach here.
HE
Helaine
1 year ago
I've got this one! Salesforce CDN is a production-only feature, so it's not supported in any sandbox environments, including Partial and Full. I'm confident that option B is the right answer here.
TY
Tyra
2 years ago
Well, well, looks like the accountant had a bit of a brain freeze on this one. I guess they were hoping the auditors wouldn't notice the old 'hide the finance lease' trick.
PO
Polly
1 year ago
C) Current liabilities will increase.
LE
Leontine
1 year ago
B) Finance costs will increase.
MA
Marva
1 year ago
A) Non-current assets will increase.
WI
Willow
2 years ago
I'm feeling confident about this one. A, B, and C are definitely the correct answers. Though I'm a little curious to see what kind of humorous comment my fellow candidates might come up with.
MA
Marsha
1 year ago
I agree, those are the correct answers.
GI
Gilma
1 year ago
I think A, B, and C are correct too.
WI
Willow
2 years ago
Hmm, let's see. Non-current assets go up, finance costs go up, and current liabilities go up. Sounds like a classic finance lease situation to me.
LA
Laurel
2 years ago
Ah, the old finance lease vs. operating lease conundrum. This one's tricky, but I think A, B, and C are the winners here.
TY
Tyisha
1 year ago
C) Current liabilities will increase.
SO
Sol
1 year ago
B) Finance costs will increase.
EM
Emile
2 years ago
A) Non-current assets will increase.
CA
Carey
2 years ago
But won't non-current assets also increase as a result of the correction?
JO
Johnathon
2 years ago
I agree with Elbert, current liabilities will definitely increase.
EL
Elbert
2 years ago
I think the correction will increase current liabilities.