1. On January 1, Year 8, Von Company entered into two non-cancellable leases of new machines for use in its manufacturing operations. The first lease does not contain a bargain purchase option, and the lease term is equal to 80% of the estimated economic life of the machine. The second lease contains a bargain purchase option, and the lease term is equal to 50% o the estimated economic life of the machine.

Required:

1. a-Explain the justification for requiring lessees to capitalize certain long-term leases. Do no limit your discussion to the specific criteria for classifying a lease as a capital lease.
2. b-Describe how a lessee accounts for a capital lease at inception.
3. c-Explain how a lessee records each minimum lease payment for a capital lease.
4. d-ExplainhowVonshouldclassifyeachofthetwoleases.Providejustification.

2.Treasury stock is being purchased with increasing frequency in lieu of dividend payments.

Required:

1. a-Explain why stock buybacks are similar to dividends from the company's viewpoint.
2. b-Explain why managers might prefer the purchase of treasury shares to the payment of dividends.
3. c-Explain why the investors might prefer that firms use excess cash to purchase treasury shares rather than pay dividends