Crown Point Inc is in the process of arranging a #8652

Crown Point Inc. is in the process of arranging a long-term lease for the company's equipment.
The company has dismissed the option of borrowing money from the bank and buying the
equipment and is now trying to decide between structuring the lease as an operating lease or a
finance lease. Lise Ranier, the company's CEO, strongly urges the controller to structure the
lease as an operating lease. "That way," she says, "we won't add debt that might create
problems with our existing debt covenants at the bank."Instructions(a) Who are the stakeholders
in this situation? (b) Explain generally how an operating lease affects the financial statements of
a company, compared with a finance lease.(c) Is it unethical to deliberately structure a lease as
an operating lease just to keep the debt off the financial statements? (d) Do you think analysts
will be able to distinguish among the financial impacts of purchasing equipment by borrowing
from a bank compared with leasing it on an operating lease or a finance lease?View Solution:
Crown Point Inc is in the process of arranging a

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