This discussion will provide you with the opportunity to analyze how capital and operating leases affect the balance sheet and income statement of the lessee and the lessor. As a result of this discussion, you will gain a deeper understanding of the effects that financial decisions and leasing have on the financial statements for a corporation.
For this discussion activity, respond to the following question: What are the implications of both a capital lease and operating lease on the balance sheet and income statement? In other words, how does each lease type affect these two financial statements? Justify your reasoning. Answer the above question either as the lessee or the lessor-pick one, please, only, for your initial response. Also, provide an example set of journal entries illustrating your choice as part of your initial response. The choices for a lessee are that a lease can be designated as either a finance lease or operating lease. The choices for a lessor are that a lease can be designated as a sales-type lease, a direct finance lease, or an operating lease.