Observe that the accumulated amortization is deducted from property under capital lease. Why is this described as amortization instead of depreciation?
The action of deducting the accumulated amortization from property under the lease is described as amortization because it is used in the case where a lease of a company is intangible. In Walmart Inc., for instance, several intangible assets can be amortized since the company’s expenses are high and there is need to reduce it through spreading the costs of assets that are intangible over the project’s life of the assets. Lease amortization is a fixed payment schedule of an asset which is intangible. The company has intangible assets that are amortized since it has a finite useful life which can appreciate over time. Also, the accumulated amortization that is deducted from property under capital lease is described as amortization because the intangible assets of Walmart or any other company are not considered to have any amortization. This makes it different from deduction where intangible assets are considered to possess residual value.
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Why do the assets under capital leases not equal the liabilities under capital leases?
Assets under a capital lease do not equal the liabilities under capital leases because the assets are being amortized while the liability decreases based on payments made. Due to the soaring amount of taxes, Walmart decided to amortize its assets to reduce tax in the present current tax fiscal year even if the assets were not paid for. As long as the assets are being used, it can ease the tax burden of Walmart. Moreover, capital leases allow the company to have extra assets and income on the balance sheet; this explains why capital leases do not equal the liabilities under capital leases. For instance, a trademark of Walmart Inc. is valued at $30,000 which is less than the amortization value of $3,000, leaving a total expense of $27,000 and not $30,000. This increase the assets of Walmart by an equal amount, and it explains why capital leases of Walmart are not equivalent to the liabilities under capital leases
Case 7-4
Discuss how to incorporate the contingency note into an analysis of Celtics Basketball Holdings, L.P., and Subsidiary.
Solution
The present situation at the L.P, Subsidiary, and Celtics Basketball Holding offers an important insight to undertake on contingencies and obligation measure that are stipulated by the company. The contingency note that would be incorporated in the case of Subsidiary, L.P and Celtic Basketball Holding should be included when analyzing the company. As stated in text from the note “Although the outcome of this matter cannot be determined at this time, any loss of games as a result of the absence of a collective bargaining agreement or the continuation of the lockout will have material advance effect on the Partnership’s financial condition and its results of operations.”
Therefore, it is crucial to integrate the contingency note when analyzing the case study and, in this case, each contingency note is supposed to be integrated to opinion speculation that is separate. Contingency note is crucial for each stakeholder of the basketball since it cautions against all the negative events that may occur in the future. These negative events may include injury that could cause paralysis. So, as much as it has been depicted from the case study that the result of the loss cannot be determent at this time, in the case where there is a loss when the operation is being carried out, there will be an adverse repercussion on the financial status of all stakeholders and as well as a partnership. In the long run, the lock depicted in the case study could have considerable favorable financial thrive as well as the power to always save returns due to a decrease in the cumulative salary payroll.
