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Capitalization of Leases that Do Not Meet the SFAS 13 Criteria

Under SFAS No. 13, leases that do not meet one of the four criteria for a capital lease are treated as operating leases. Argue for the capitalization of leases that do not meet any of the SFAS 13 criteria for a capital lease. Your argument should take into consideration the conceptual framework definitions of assets and liab

Brookdale Clothing

Please the attached file. Brookdale Clothing The treasurer for Brookdale Clothing must decide how much money the company needs to borrow in July. The balance sheet for June 30, 2004 is presented below: Brookdale Clothing Balance Sheet June 30, 2004 Cash $75,000 Accounts payable $

Southwest Airlines Co - Balance Sheet

You have been presented with the following selected information taken from the financial statements of Southwest Airlines Co. SOUTHWEST AIRLINES CO. Balance Sheet (partial) December 31 (in millions) 2004 2003 Total current assets $ 2,172 $ 2,313 Noncurrent assets 9,165 7,565 Total assets $ 11,337 $ 9,878 C

Lease Vs. Buy - Sadik Industries

This is a is a lease vs buying that I have been struggling with. How do you work this? Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain a bank loan for 100% of the required amount. Alternatively, a Texas investment banking firm which represents a group of investors believes that it c

Deciding which base to close

The U.S. Defense Department has the difficult decision of deciding which military bases to shut down. Military and political factors obviously matter, but cost savings are also an important factor. Consider two naval bases located on the West Coast?one in Alameda, California, and the other in Everett, Washington. The Navy has de

Amortization Schedule and Journal Entries for Lessee

Laura Leasing Company signs an agreement on January 1, 2007, to lease equipment to Plote Company. The information at the top of page 1136 relates to this agreement. 1. The term of the noncancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset

Computing Values and Assessing Financial Statements

McDonalds 2004 financial statements contain the following selected data (in millions) Current Assets $2,857.8 Total Assets 27,837.5 Current Liabilities 3,520.5 Total Liabilities 13,636 Interest exp. $358.4 Income taxes 923.9 Net income 2,278.5 a) Compute the following values and provide a brief interpreta

Business Analysis - Your friend, Mike, has just purchased a business

Your friend, Mike, has just purchased a business. He has asked for you help in evaluating the firm. Mike is not asking you to make a decision for him; he just wants you to help provide him with facts as you see them. The task is to analyze the business and report your findings. Be sure to tell Mike everything that you can thi

Lease Classifications - Doherty Company

Lease Classifications Doherty Company leased equipment from Lambert Company. The classification of the lease makes a difference in the amounts reflected on the balance sheet and income statement of both Doherty and Lambert. a. What criteria must be met by the lease in order that Doherty Company classifies it as a capital l

Value Enhancing Strategies

1. In your words, briefly describe a synergy. Why are synergies so important? 2. Why do such a large portion of mergers and acquisitions fail to meet the pre-acquisition targets. 3. Explain how lease rates are calculated (by the lessor)150-200 words 4. Choose 1 of the following Value drivers and briefly discuss why it is im

Enterprise Risk - Joe Bob signs an equipment lease with Eddie's Rentals.

Joe Bob signs an equipment lease with Eddie's Rentals. The contract contains this clause: "Lessor disclaims all liability arising from injuries caused by use of this equipment." The starter pull cord on the grass dethatcher Joe Bob rented snapped, putting out Joe Bob's eye and lacerating his lip. Joe Bob sues Eddie's for his

Present Value, Positive and Negative Aspects

The company you work for is expanding and will need to obtain additional production equipment. Your manager is looking for a cost analysis of whether the company should buy or lease equipment. See attachment for data. 1) Calculate the PV for each option in the attached appendix. 2) List out three positive aspects of th

Ed owns Oak Knoll Apartments

Ed owns Oak Knoll Apartments. During the year, Fred, a tenant, moved to another state. Fred paid Ed $1,000 to cancel the two-year lease he had signed. Ed subsequently rented the unit to Wayne. Wayne paid the first and last months' rents of $800 each and a security deposit of $500. Ed also owns a building that is used as a health

Raymond Rayon Corporation

Raymond Rayon Corporation wants to expand its manufacturing facilities. Liberty Leasing Corporation has offered Raymond Rayon the opportunity to lease a machine for $100,000 for five years. The machine will be fully depreciated by the straight-line method. The corporate tax rate for Raymond Rayon is 25 percent, while Liberty

Lease Vs. Buy - Wolfson Corporation

Wolfson Corporation has decided to purchase a new machine that costs $3 million. The machine will be worthless after three years. Only straight-line method is allowed by the IRS for this type of machine.Wolfson is in the 35-percent tax bracket. The Sur Bank has offered Wolfson a three-year loan for $3 million.The repayment sc

Capital Lease vs Operating Lease

1. What do I mean when I say to match the type of financing with the useful life of the asset? 2. What is the difference in a Capital Lease and an Operating Lease? When is one more useful over another? For the second example, do you want just definition or want us to provide examples? Thank you. Examples would be wonderful

Financing Strategy and Valid Leasing Statements

14.11 The Cable Company has $1 million of positive NPV projects it would like to take advantage of. If Cable's managers follow the historical pattern of long-term financing for U.S. industrial firms, what will their financing strategy be? 21.1 Discuss the validity of each of the following statements. Leasing reduces risk

Break-even, Net Income target, MOS

Fruit-Pit Company produces a single product. The results of the company's operations for a typical MONTH are presented in contribution format as follows: Sales $540,000 Variable expenses $360,000 Contribution margin $180,000 Fixed expenses $120,000 Net operating income $60,000 The company produce

Lease versus buy decision

In the lease versus buy decision, leasing is often preferable A. Since it does not limit the firm's ability to borrow to make other investments. B. Because, generally, no down payment is required, and there are no indirect interest costs. C. Because lease obligations do not affect the riskiness of the firm. D. All of t

Accounting for Leases

On January 2, 2004, Gonzalez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $90,000 starting at the end of the first year, with title passing to Gonzalez at the expiration of the lease. Gonzalez treated this transaction as a capital lease. The drill press has an

Figuring NAL of a lease

Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. 2. Under either the lease of the purchase, Big Sky must pa

Business Law UCC2-712,2A-518

I need help in finding a solution to Business Law UCC2-712,2A-518 which is a remedy of the buyer or lessee which is under the RIGHT OF COVER. I need a short a paragraph for each explanation of the right of cover. Thanks Explanation # 1 (demonstrate how an existing statute or regulation provides a remedy to a consumer when

Lease vs purchase

Danny is considering buying a new computer. The computer is $2,090.00. Should Danny purchase it outright, or lease it? A purchase would be done via credit card, financed at 15%, with payments of 100 dollars per month applied. Here are the terms for his three lease options: FML Lease Months Payment/mo Total$ ........

Who Should Buy the New Warehouse Building

Caroline is the sole shareholder of Lincoln Corporation. Lincoln's sales have doubled in the last four years, and Caroline has determined that the business needs a new warehouse. Caroline has asked your advice as to whether she should: (1) Have the corporation acquire the warehouse or (2) Acquire the warehouse herself and

Finance Questions

A.....Why is it important to classify cash flows according to operating, investing, and financing activities? What does each category represent? b......Also, What are the three types of capital available to a firm (assume leasing is a form of debt)? How do firms obtain these three types of capital?

Analysis of a Business Problem

I figured out B, but cannot get A and C. Any help would be appreciated. Jean-Luc is a financial executive with Starship Enterprises. Although Jean-Luc has not had any formal training in finance or accounting, he has a "good sense" for numbers and has helped the company grow from a very small company ($500,000 sales) to a l

Accounting Multiple Choice

48. Which of the following is not a source of industry information? A) SEC manuals B) Standard and Poor's C) Trade Journals D) Robert Morris Associates 49. Which of the following information would not be filed with the SEC by a publicly traded company? A) 10-K report B) Prospectus C) Proxy statement D) Tax return