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Capital Structure, Dividend Policy and Comparing Borrowing Costs

1. (Capital Structure) Sanderson Manufacturing Company would like to achieve a capital structure consistent with a Baa2/BBB senior debt rating. Sanderson has identified six comparable firms and calculated the credit statistics shown here. a. Sanderson's return on assets is 5.3%. It has a total capitalization of $600 million.

Lease or Purchase Decision: Wyndham Stores

Wyndham Stores operates a regional chain of upscale department stores. The company is going to open another store soon in a prosperous and growing suburban area. In discussing how the company can acquire the desired building and other facilities needed to open the new store, Harry Wilson, the company's marketing vice president,

Lease or Buy Decision: Superjet 25

See the attached file. Lease or Buy decision Larine Industries wants an airplane available for use by its corporate staff. The airplane that the company wishes to acquire, a Superjet 25, can either be purchased or leased from the manufacturer. Larine Industries' cost of capital is 20% and the tax rate is 30%. The company has m

Leases and Bargain Options

See the attached file. 1. Lease A does not contain a bargain purchase option, but the lease term is equal to 90% 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% of the estimated economic li

General Farms Inc, Cassy Beauty Company: depreciation expense, gross profit margin

1. General Farms, Inc. had sales of $750,000, cost of goods sold of $200,000, selling and administrative expense of $70,000, and operating profit of $150,000. What was the value of depreciation expense? 2. Cassy Beauty Company had sales of $320,000 and cost of goods sold of $112,000. What is the gross profit margin (ratio of g

Debt Ration and Financial Risk

Suncoast Healthcare is planning to acquire a new x-ray machine that costs $200,000. The business can either lease the machine using an operating lease or buy it using a loan from a local bank. Suncoast's balance sheet prior to acquiring the machine is as follows: Current assets : $100,000 Debt : $400,000

Von Company: Capital Lease

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, a

Capital Lease: JK Company.

JK Company has the following balances on the 2008 B/S: current assets=70,000, long-term assets=250,000, current liability=40,000, long-term debt=130,000, and stockholders equity=150,000. The company has an operating lease contract. It promises to pay a lessor $10,000 annually for the next three years. The company s average borro

Leased Asset, Liability, and Amortization Schedule

Federated fabrications leased a tooling machine on January 1, 2011, for a three-year period ending December 31, 2013. The lease agreement specified annual payment of $36,000 beginning with the first payment at the inception of the lease, and each December 31 through 2012. The company had the option to purchase the machine on Dec

Depreciation and Leases

To raise operating funds, Signal Aviation sold an airplane on January 1, 2011, to a finance company for $770,000. Signal immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $800,000. Its cost and its book value were $620,000. I

Net Advantage to Leasing Question

Neighborhood Savings Bank is considering leasing $100,000 worth of computer equipment. A 4 year lease would require payments in advance of $22,000 per year.  The bank does not currently pay income taxes and does not expect to have to pay income taxes in the foreseeable future.  If the bank purchased the computer equipment,

Cost of goods manufactured and cost of goods sold statement

TRIPLE ENTERPRISES INC TRIAL BALANCE Debits Credits Cash $669.51 Accounts Receivable $1,420,530.43 Prepaid Insurance $5,147.72 Allowance for Doubtful Acounts $73,214.87 Inventory - Raw Material $256,364.04 Inventory - Finished Goods $8,350.87 Inventory - WIP $85,542.56

Business Terminology Long Term Liabilities

I need some help reviewing the following topics listed. Definitions would be great. Long term Liabilities part#1: - Leases - Off-balance sheet obligation - Long term debt (notes and bond) Long-term Liabilities part#2: - Pensions - Other retirement benefits Long-term liabilities part# 3: - Deferred taxes

Legal Due Diligence

Identify the required licenses and permits for your selected business and its scenario. Acquiring Capital Assets: Compare the legal consequences of the buy versus lease decision for the capital assets the business will need, and explain what method is best for your business.

P 9-10 Contingent Liabilities P 10-5 Financial statement Impact of a Lease

Problem 9-10 Contingent Liabilities Several items are listed for which the outcome of events is unknown at year-end. a. A company offers a two-year warranty on sales of new computers. It believes that 4% of the computers will require repairs. b. The company is involved in a trademark infringement suit. The company's legal exp

Compare and Contrast Lease Versus Purchase Options

Compare and contrast lease versus purchase options, including advantage and disadvantages. How are debt financing and equity financing related to lease and purchase and please give a couple of examples for each? What is an alternative capital structure and its advantages and disadvantages? Which one is better? Please provide you

Accounting Fix, Variable, Direct and Indirect Cos.

1. Which of the following statements concerning direct and indirect costs are NOT true? Whether a particular cost is classified as direct or indirect does not depend on the cost object. A direct cost is one that can be easily traced to the particular cost object. The factor manager's salary would be classified as an indir

updated database system

The Uniform Leasing Company currently utilizes a number of outdated database systems. Describe a scenario where it might be beneficial for the uniform leasing company invest in an updated database system. Additonally, -Describe the capabilities, advantages, and disadvantages of newer database systems currently on the mar

The Uniform and Linen Leasing Company (U&L) environmental problems

Background Information: The Uniform and Linen Leasing Company (U&L) expansion plans include building a manufacturing facility in a small town in Pell City, Alabama to manufacture cleaning products as well as perform research and development for new products. By locating their facility in this town, U&L will receive substantia

Notes And Disclosures For A Fictitious Annual Report

A) Prepare simple fictitious financial statements B) Write notes for the fictitious annual report. Note 1: Significant Accounting Polices (consisting of at least 10 items) Notes 2-10+: Consisting of at least the items below. Inventory Property, Plant, & Equipment Contingencies and Liabilities Changes in Accountin

Uniform and Linen Leasing Company; employee turnover

The Uniform and Linen Leasing Company (U&L) is experiencing problems in its Detroit, MI location with employees leaving the company at a high rate. Complaints from customers have been coming in for this location regarding late or missed pick-ups and deliveries, unfriendly attitudes of U&L employees, extra charges, and unpressed

This post addresses the capital lease for Seven Wonders.

On January 1, 2011, Seven Wonders Inc. signed a five-year non-cancelable lease with Moss Company. The lease calls for five payments of $277,409.44 to be made at the end of each year. The leased asset has a fair value of $1,200,000 on January 1, 2011. Seven wonders cannot renew the lease, there is no bargain purchase option, and

Lessor Company : Making computations for lessee and lessor

Lessor Company has a machine with a cost and fair value of $100,000 that it leases for a 10-year period to Lessee Company. The machine has a 12-year expected economic life. Payments are received at the beginning of each year. The machine is expected to have a $10,000 residual value at the end of the lease term. (Lessee is not gu

INTEGRATIVE CASE 7.1 Starbucks Case

Please answer the questions A-E for this case. Case: INTEGRATIVE CASE 7.1 STARBUCKS Part 1-Accounting Policy Presented below are excerpts from Note 1 to Starbucks' September 28, 2008, Consolidated Financial Statements in which Starbucks describes accounting policy for long-lived assets. Excerpts from Note 1:

Type of audit opinion(s) to be issued

For each of the following situations discuss: Type of audit opinion(s) to be issued. Give your reason(s) and in each situation describe any necessary changes to the standard audit report. State your assumptions and consider in your response all possible alternatives. You can assume that the transactions are material.