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Leasing

Optimal cost structure, operating leverage, business risk

1. Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed costs, F, are $2 million; 50 earth stations are produced and sold each year; profits total $500,000; and the firm's assets (all equity financed) are $5 million. The firm estimates that it can change its production proces

The solution to Advanced Accounting - Balance Sheet Reporting

Crumple Car Rentals is planning to expand into the western part of the United States and needs to acquire approximately 400 additional automobiles for rental purposes. Because Crumple's cash reserves were substantially depleted in replacing the bumpers on existing automobiles with new "fashion plate" bumpers, the expansion fund

CASH FLOWS STATEMENTS

The store has no accounts receivable (it accepts only cash or bank cards for payments). At year end, an employee earned $200, which the store had not yet paid. Also, at year-end, the store had not yet paid it most recent utilities bills, which totaled $150. Receipts Cash sales

Calculate the issue price of bonds and prepare adjusting entries.

1. BE14-1 Ghostbusters Corporation issues $300,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. Don't need to do this one - (BE14-2 The Goofy Company issued $200,000 of 10% bonds on January 1, 2008. The bon

Leases and pension

9. Presented below is pension information for Welch Company for the year 2008: Actual return on plan assets $24,000 Interest on vested benefits 15,000 Service cost 30,000 Interest on projected benefit obligation 21,000 Amortization of prior service cost due to increase in benefits 18,000 The amount of pension expense t

Financial accounting

Project Scenario Hi, I'm Jan Waters, the controller for Calliope Knowledge Solutions. Welcome to the company. It's good to have you with us. I wanted to talk to you about your new project. As you know, Calliope provides professional education courses. Our top priorities are to offer a low cost product, and exceed market com

Financial Accounting

1. According to GAAP (the generally accepted accounting principles), some leases must be recorded as a purchase. What is the basis for this treatment? a. a lease of this type effectively conveys the same benefits and risks to the lessee as it would an owner of the property b. the lease must be recorded in accordance with the

Lease vs. purchase decision

Edison Electronics is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If it purchases the asset, the cost will be $8,000. It can borrow funds for four years at 12 percent interest. The firm will use the three-year MACRS depreciation category (with the associat

Decision making / Cost Benefit Analysis

I need to discuss the alternatives and options, my plan chosen and research done (i.e. cost of computers if I chose to buy them for years of training to come because we will always do training). I also need to provide rationale for why I would choose one option over another. Can you help me please? Thank you! Trainin

Decision making / Cost Benefit Analysis

I need to discuss the alternatives and options, my plan chosen and research done (i.e. cost of computers if I chose to buy them for years of training to come because we will always do training). I also need to provide rationale for why I would choose one option over another. Can you help me please? Thank you! Trainin

The Deluxe Corporation Lease of Asset

The Deluxe Corporation has just signed a 120-month lease on an asset with a 15-year life. The minimum lease payment s are $2,000 per month ($24,000 per year) and are to be discounted back to the present at an 7 percent annual discount rate. The estimated fair value of the property is $175,000. Should the lease be recorded as

Accounting: Costs, Cash, Income

0. Managers determine product prices by adding to a cost amount a plus, called a 1. The amount of increase or decrease in revenue expected from a course of action as compared with an alternative is called 2. Costs that have been incurred in the past and are not relevant to a decision are known as 3. Raymond Tile Co. is

Income statement of Maltbee Lawn Service

Doug Maltbee formed a lawn service business as a summer job. To start the business on May 1, he deposited $1,000 in a new bank account in the name of the proprietorship. The $1,000 consisted of a $600 loan from his father and $400 of his own money. Doug rented lawn equipment, purchased supplies, and hired fellow students to mow

Optimizing the Input Mix

Agronomists at Roma's banana Experimental Research Station, in preparation for the global commercialization of this fruit are seeking to implement the most cost-effective method of harvesting bananas, one that would result in "LONG-RUN" cost minimization. They are contemplating the 2 alternatives described below: PERFORM CA

Bob and Jane Case Study

2) Bob and Jane decide to open their own business selling ergonomically correct office furniture that Jane has designed. Assume they operate this business from leased office space near their home. Also assume that they lease their computer equipment and data base software. The actual production of the furniture is subcontracted

Should Super Sonics buy or lease?

Please help with the following problem. Super Sonics Entertainment is considering borrowing money at 11 percent and purchasing a machine that costs $350,000. The machine will be depreciated over five years by the straightline method and will be worthless in five years. Super Sonics can lease the machine with the year-end pay

Leasing and Borrowing Analysis

Discuss the validity of each of the following statements. 1. Leasing reduces risk and can reduce a firm's cost of capital. 2. Leasing provides 100-percent financing. 3. Firms that do a large amount of leasing will not do much borrowing. 4. If the tax advantages of leasing were eliminated, leasing would disappear.

Capital Leases as in Substance Purchases of Assets.

NEED SOLUTION FOR THESE CASES Case 13-11 Capital Leases as in Substance Purchases of Assets. Required: Explain how a capital lease is in substance a purchase of an asset. Tie your explanation to the Conceptual Framework's definitions of assets and liabilities. PLEASE SEE ATTACHMENT for the other two cases, 12-4 and 13

Decision Making under Uncertainty

A company owns a lease granting it the right to explore for oil on certain property. It may sell the lease for $75,000, or it may drill the oil. The four possible drilling outcomes are listed below, together with probabilities of occurrence and dollar consequences: Possible Outcome Prob. Consequences ($ thou

Accounting for Leases

Python Company leased equipment from Hope Leasing on January 1, 2006. Hope purchased the equipment at a cost of $222,666. Other information: Lease term 3 years Annual payments $80,000 on January 1 each year starting in 2006 Life of asset 3 years Fair value of asset $222,666 Implicit interest rate 8% Incremental rate 8%

Audit for Leases

13-39 (Audit for Leases) The Rousch Racing Company is in the business of building NASCAR race cars. They also have an engineering department that builds components for other racing teams, as well as for specialty cars built for major manufacturers such as Ford Motor Company. Rousch has three lease related accounts on their books

Ford Company: Similarities and differences of these 3 areas within the company

Explain the similarities and differences of these 3 areas within the Ford Motor Company. Development and Property Management As the company's commercial development arm, we work on high-rise office buildings, research and development buildings, hotels and more. We take these projects from concept through construction and i

Lease payments

20. The Lollar Corporation plans to lease an $800,000 asset to the Pierce Corporation. The lease will be for 12 years. a. If the Lollar Corporation desires a 10 percent return on its investment, how much should the lease payments be? b. If the Lollar Corporation is able to generate $120,000 in immediate tax shield benefits fro

Leasing vs. Buying

What risks and uncertainties should be considered while making a lease vs. buy decision? How do these risks and uncertainties impact capital budgeting? What is the advantage of computing the present value of outflows in making lease vs. buy decisions? In what circumstances is a capital lease a better alternative to an operating

Classification and Reliability of Audit Evidence

7-36 (Classification and Reliability of Audit Evidence) Following are examples of documentation typically obtained by auditors. For each example: a. Classify the documentation as internal or external evidence. b. Classify the documentation as to its relative reliability (high, moderate, or low). c. Identify an account

Calculate annual lease payments

Leases R Us, Inc. (LRU) has been contracted by Robotics of Beverly Hills (RBH) to provide lease financing for a machine that would assist in automating a large part of their current assembly line. Annual lease payments will start at the beginning of each year. The purchase price of this machine is $250,000, and it will be leased

The Necessary Journal Entries to Record the Transactions

On January 2, 1999, the Wilcox Studios leased six computers for use in the engineering department. The lease period is for 13 years and the estimated economic life of the leased property is 15 years. The lease doesn't contain automatic title transfer or a bargain purchase option. Lease payments are $9,000 per year, payable each

Edison Electronics

Edison Electronics is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If it purchases the asset, the cost will be $8,000. It can borrow funds for four years at 12 percent interest. The firm will use the three-year MACRS depreciation category (with the associat