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How should the lessee classify these leases

Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the lease

Lease vs. Buy question

Craxton Engineering will either purchase or lease a new $756,000 fabricator. If purchased, the fabricator will be depreciated on a straight-line basis over seven years. Craxton can lease the fabricator for $130,000 per year for seven years. Craxton's tax rate is 35%. (Assume the fabricator has no residual value at the end of

Business Law Help

1. What areas of the Constitution pertain to your organization or business? Explain, using examples. 2. Why is it important for managers to understand legal terminology? Explain, using examples.

Analyzing Financial Statements with ratios, break even

Analyzing financial statements. I have attached a sample balance sheet, income statement as statement of cash flows as a guide. Using XYZ Corporation guide, calculate the following for each year (2002, 2003 and 2004): Current ratio = Long-term solvency ratio = Contribution ratio = Management/expense ratio = Revenue/ex

Railcar Leasing: Lessors' direct financing lease

See attached spreadsheet for resources. On January 1, 2005, Railcar Leasing Inc. (the lessor) purchased 10 used boxcars from Railroad Equipment Consolidators at a price of $8,345,540. Railcar Leasing, Inc. immediately leased the boxcars to the Reading Railroad Company (the lessee) on the same date. The lease calls for eight a

Decision Making and Costing Problems

Westcost Air Co. leases a single jet aircraft and operates between San Francisco and the Fiji. Flights leave San Francisco on Mondays and Thursdays and depart from Fiji on Wednesdays and Saturdays. Westcost Air Co. cannot offer any more flights between San Francisco and Fiji. Only tourist-class seats are available on its plan

Finance 370 MCQ questions

1. Which of the following statements best represents what finance is about? a. How political, social, and economic forces affect corporations b. Maximizing profits c. Creation and maintenance of economic wealth d. Reducing risk 2. The goal of the firm should be: a.

Expand production with overtime or lease another plant

The company needs to expand its production capacity. This can be done in one of two ways: using overtime in its current plant or leasing another plant. Overtime has a cost penalty (above regular time) of $3 per case of of product produced, and can only be used for up to 15,000 cases per year. Leasing another plant would entail a

Raising Additional Capital by Debt, Equity and Merger

Using the scenarios given in Week 2, calculate the capital that Blue Sky Airlines needs and indicate what sources you will use in your capital plan. Assume that if you go bankrupt you will only be able to secure debt based on aircraft assets - unsecured debt or stock sales options will not be available to you for the duration of

A Noncancelable Lease is Classified as a Capital Lease

On January 1, 2006, Lani Company entered into a noncancelable lease for a machine to be used in its manufacturing operation. The lease transfers ownership of the machine to Lani by the end of the lease term. The term of the lease is eight years. The minimum lease payment made by Lani on January 1, 2006, was one of eight equal

Doherty Company: Capital lease and sales type lease

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 classify it as a capital lease? b) What criteria

Doherty Lease Equipment Strategies

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. Required: a. What criteria must be met by the lease in order that Doherty Company classify it as a capital lease? b. What c

Leasing can be a way for an organization to hide a liability.

Leasing has become a way that many organizations attempt to hide liability. How is this possible? From an accounting standpoint, what must a company recognize in most basic leasing transactions? Describe the accounting literature around leasing and the many benefits.

Coinsurance and Deductible

Explain the concepts of coinsurance and deductible in relation to property insurance. Why do insurance companies have these clauses in their policies?

Types of debt and equity instruments

Based on Target's current financial statements (web link below), how can the types of debt and equity instruments be identified that the company uses? Do they have bank debt, long term debt provided by other financial institutions, bonds they have issued and different issuances of those bonds or other types of long term debt?

What is a lease?

What is a lease? Why would you choose to lease a capital item versus buy? What steps would one follow to decide whether to lease or buy a computer system?

Government and Nonprofit Accounting: 41 MCQ

1. A primary characteristic that distinguishes governmental entities from business entities is a) The need to generate revenues equal to or in excess of expenditures/expenses. b) The importance of the budget in the governing process. c) The need to provide goods or services. d) The correlation between revenues generated a

Thomas Corporation: lease or purchase equipment

I am working on a few problems to study from. Please provide detail for the 3 attached problems. Question 4. (15 points) Pierre Imports will be liquidated. Its current balance sheet is shown below. Fixed assets are sold for $900,000 and current assets are sold for $700,000. All fixed assets are pledged as collateral for

Accounting Scenarios Memo's

Consider the following scenario: While working on a consulting engagement, a supervisor in your team has given you an assignment. The client is a regional trucking company. A new customer has approached the client with an opportunity that will require it to utilize 120 trailers-20 more than the trucking company currently owns. T

Pro Forma Finacial Statements for Apple Computer Inc

I need help in this area and would appreciate some assistance. -Create two-year pro forma financial statements that reflect current performance of the economy in general, the industry in particular, and global economic conditions. - Make recommendations that support your pro forma statements with regards to working capital

Present value of the lease payments

Question 1: (1 point) (Ignore income taxes in this problem.) Domebo Corporation has entered into a 7 year lease for a piece of equipment. The annual payment under the lease will be $4,300, with payments being made at the beginning of each year. If the discount rate is 8%, the present value of the lease payments is closest to:

Financial Lease Option

You are the owner of a start-up company that is small, but growing fast. To support your growth, you need to purchase some long-term fixed assets. You are considering whether to buy or lease. Why might a financial lease be especially attractive for your situation?

Lease or Buy

1. Lease or Buy. Your company wants to purchase a new network file server for its wide-area computer network. The server costs $75,000. It will be completely obsolete in three years. Your options are to borrow the money at 10 percent or to lease the machine. If you lease, the payments will be $27,000 per year, payable at the