I knwo that: it creates Asset. does it create libility? is there any other direct effect? wihch chapter is this from?
yes. i creates liability. you should really start doing a bunch of problems on this topic. many many effects on bs, ratios, income statement, cashflows
no liability for capital expenditures unless it’s a capital lease
yeah supersharpshooter is right. the amount is added to assets for capitalizing development costs. capital leases you add it to liability
i always assume lease for some reason. ive discovered 2 differences between capitalizing leases vs. expenses lease: d/e higher, cff lower expense: d/e lower, cfi lower any others?
supersharpshooter Wrote: ------------------------------------------------------- > no liability for capital expenditures > > unless it’s a capital lease on lease you add to asset and liability
When you increase the asset value by adding the interest charges, which other account in affected in the BS? Retained earnings?
Increase Assets and Owners Equity. Assets is offset by debiting depreciation expense in later periods which reduces RE i.e. equity over a number periods. As stated above, only capital leases create a liability. You would not increase RE. RE increases and decreases periodically from income/gains losses/write-downs respectively.