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Lease or Buy After Tax Decisions

Our company is considering leasing a diagnostic scanner. The scanner costs $2.5 million and qualifies for a 30 percent CCA rate. Because of radiation contamination, it is valueless in four years. We can lease it for $800,000 per year for 4 years. Question 1. Assume the tax rate is 37%. You can borrow at 7.5% pretax. Shoul

Claiming expenses

When can you claim transportation expenses in your job and in conducting charity / community work expenses as deductions? And, what considerations determine when to use actual expense or mileage allowance for automobile travel?

Lease Lone Star 2 begin year semi-annual pmts

Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2006. The manufacturing cost of the computers was $12 million. This non-cancelable lease had the following terms: Lease payments: $2,466,754 at the beginning of each 6 mo. period, with the first payment being made at 1/1/06. Lease

Comparing Lease, Debt and Equity Financing

What are the principal advantages and disadvantages of lease financing? Which of the purported advantages are really of dubious value? Compare and contrast leasing with debt/equity finance.

Finance: Lease Agreement and Capital Budgeting

At the beginning of its accounting year Alice plc leases a machine from Louise Leasing plc. The following information relates to the lease agreement: 1. The term of the lease is 5 years, and the lease agreement is non-cancellable, requiring equal rental payments of £9,276 at the beginning of each year; 2. The machine has a fa

Principles of Accounting

Describe for the students the primary objectives of accounting. Explain the basic terminology of the accounting process or financial reporting. Explain how accounting can affect your personal life emphasizing professional ethics. Explain the role that technology has played in small business accounting. Please include AP

Capital vs. Operating Leases

Capital versus Operating Leases On January 2, 2008, two identical companies, Daggar Corp. and Bayshore Company, lease similar assets with the following characteristics: 1. The economic life is eight years. 2. The term of the lease is five years. 3. Lease payment of $20,000 per year is due at the beginning of each year begi

Lease/Buy Finance Problem

Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life, so the interest expense for taxes would decline o

Business and Financing Sample Problems

Dear Sir/Madame, I need assistance in the questions mentioned below. I would like to compare them to the answers I already have. Please provide the answers in excel format. Thank you A. Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the e

Patrick Wise Inc: Account for an Operating Leases

On January 1, 2008, Doug Nelson Co. leased a building to Patrick Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,500,000 and was purchased for cash on January 1, 2008. 3. The building is depreciated on a straight-line basis

Bensen and Flynn: Lessee-Lessor Entries; Sales-Type Lease

On January 1, 2008, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2. Equal rental payments are due on January 1 of e

Allied Package Express Service properly capitalized

36. Allied Package Express Service properly capitalized at $93,598 a large truck it had leased on January 1, 2011. The truck has a 14-year useful life. Title to the truck passes to Allied at the end of the 12-year lease term. Allied depreciates other similar trucks on the straight-line method with no salvage value. The lease agr

L. Rashid Company: Leasing

L. Rashid Company, a rapid growing chemical company needs to raise $3 million in external funds to finance the acquisition of a new chemical waste disposal system. After carefully analyzing alternative financing sources, Denise MacMahon, the firm's vice president of finance reduced the financing alternatives to three choices: (1


Indicate whether each of the following independent transactions is a capital (C) or operating (O) lease. a. __________ A firm signs a 5-year lease for equipment with a 7-year life. b. __________ A firm signs a lease for property with a fair market value of $20,000. The present value of the lease payments is $16,000. c. ____

Kohers Inc. Lease Arrangement

Kohers Inc. is considering a leasing arrangement to finance some manufacturing tools that it needs for the next 3 years. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% a

Total obligation and loss recorded on bonds

Can you help me get started on this assignment? 1) The December 31, 2006, balance sheet of Eddy Corporation includes the following items: 9% bonds payable due December 31, 2015 $1,000,000 Unamortized premium on bonds payable 27,000 The bonds were issued on December 31, 2005, at 103, with interest payable on July 1 and De


Intermediate Accounting-12th ED (KIESO, WEYGANDT, and WARFIELD) 1. Chapter 10 #4 Indicate where the following items would be shown on a balance sheet. (a) A lien that was attached to the land when purchased. (b) Landscaping costs. (c) Attorney's fees and recording fees related to purchasing land. (d) Variable overhead r

Lease agreements: determine whether operating or capital lease, identify factors

The XYZ Company entered into the following leasing arrangements, as the lessee, during the current year: A. XYZ leased a copy machine for 3 years. The fair market value of the machine at the inception of the lease was $17,500 and XYZ agreed to pay a quarterly lease payment of $1,475. At the end of the lease the remaining li

Travelling Question

Question 1 "If all chocolate is fattening, and if this dessert has chocolate in it, then this dessert must be fattening." This is an example of which kind of moral reasoning? A. deductive logic B. sense experience C. science D. intuition Question 2 A manager who makes ethical decisions on the basis of see

Jose Rijo Inc: Buy or Lease new facility for expanding hardware stores

Jose Rijo Inc. owns and operates a number of hardware stores in the New England region. Recently the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building and related facilities. Purchase: The company can purchase the site,

Proust Manufacturing Co: Calculate the NPV for new production or lease option

8. Proust Manufacturing Co. produces personal fitness machines sold through infomercials. The once successful line is no longer selling well, so the company is considering production of a new improved cardio-vascular machine. The project's expected after tax cash flow is given below. The after tax cash flow at time zero, $-700,0

Windham Condos Product and Cost Systems: Calculate net rental income; asset value

Windham Condos Corporation is a small company owned by Caleb Norman. It leases three condos of differing sizes to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance cost. Other direct operating costs consist of interest and depreciation. The direct operating costs for each condo