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Southwest Corporation: Leasing versus Buying Decision Making for machine tools

You are the controller for the Southwest Corporation. To expand your manufacturing facilities you are interested in acquiring several machine tools. Your company president has asked you give him advantages and disadvantages (comparisons) for buying this equipment or leasing this equipment. List at least four advantages and d

Linear Programming: Sundown Rent-a-Car

1. Management of Sundown Rent-a-Car (see Problem 8-8) has decided that perhaps the cost during the six-month period is not the appropriate Cost to minimize because the agency may still be obligated to additional months on some leases after that time. For example, if Sundown had some cars delivered at the beginning of the sixth m

25 Short Answer Finance Questions

1. Al Corporation has an operating profit of $10,000,000 and $100,000, 000 in sales. What is Al's profit margin (PM)? 2. Ala Corporation has net operating assets of $100,000,000 at 12/31/2010, $110,000,000 at 12/31/2011, and $100,000, 000 in sales for 2011. What is Al's average operating asset turnover (ATO) for 2011? 3. B

8 multl choice questions on Financial Statement Analysis

1. The new management of XYZ Inc. has increased the amount of their year-end expense accruals by over 25% compared to recent years, primarily in recording higher estimated future bad debts (bad debt expense). The most likely reason for this action is A) to increase net income this year to make the new management look goo

Google's operating lease commitments

In concert with the IASB, the FASB is rethinking accounting for leases. Because obligations to make operating lease payments contribute to a company's riskiness, some accountants speculate that new lease standards might require leases now considered to be operating leases to be capitalized the way we now record capital leases.

Lease or Buy Asset; Impact to Ratios and Financials Statements

Your company needs a new asset costing $500,000. 1. Discuss pros and cons of options for getting the resources (cash, or lease) to get this asset. For each option, discuss the impact on the financial statements, highlight an impact on at least two financial ratios and discuss the impact on the capital structure. 2. Pick a

Compute avoidable interest

1. Brett Hull Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,500,000 on March 1, $1,200,000 on June 1, and $3,000,000 on December 31 Brett Hull Company borrowed $1,000,000 on March 1 on a 5-year, 12% note to help finance construction of the building.

MCQ: Define the lease receivable under a direct financing lease

In order to properly record a direct-financing lease, the lessor needs to know how to calculate the lease receivable. The lease receivable in a direct-financing lease is best defined as The amount of funds the lessor has tied up in the asset which is the subject of the direct-financing lease. The differen

Gardial Automation: Should the loom be leased or purchased?

As part of its overall plant modernization and cost reduction program, Western Fabrics' management has decided to install a new automated weaving loom. In the capital budgeting analysis of this equipment, the IRR of the project was found to be 20% versus a project required return of 12%. The loom has an invoice price of $250

Option Pricing, Warrants, Lease or Buy, Duration of Bond

1. GS, Inc. stock is selling for $28 a share. A 3-month call on GS stock with a strike price of $30 is priced at $1.50. Risk-free assets are currently returning 0.3% per month. What is the price of a 3-month put on GS stock with a strike price of $30? 2. A firm has 100 shares of stock and 40 warrants outstanding. The war

CVP Analysis

Ozark, Inc. produces small-scale replicas of vintage automobiles for collectors and museums. Finished products are built on a 1/20th scale of originals. The firm's income statement showed the following: Revenue (2,400 units) $1,584,000 Variable expenses 871,200 Contribution margin 712800 Fixed ex

Finance Review- Multiple Choice

1. For accounting purposes, which of the following conditions would automatically cause a lease to be a capital lease? a. The lessee can purchase the asset below fair market value at the end of the lease. b. The lease transfers ownership of the asset to the lessee by the end of the lease. c. The lease term is more than

Restructuring Debt using the settlement of debt method

Individual Assignment: Restructuring Debt Your company is in financial trouble and is in the process of reorganization. Your manager wants to know how you will report on restructuring the debt. Use the following information to help with this assignment. Part A ASSETS CURRENT ASSETS Cash and cash equiva

Calloway Company: Compute Interest on a financing lease

3. (1) On January 1, 2009, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a direct financing lease. Calloway paid $240,000 for the machine and is leasing it to Zone for $34,000 per year, an amount that will return 10% to Calloway. The present value of the minimum lease payments is $240,000. The lea

Funding options

In 200-300 words: What are some considerations when deciding on a funding option (i.e. leasing, financing, etc.)? please provide references if used

United Hospital Leasing proposal for a Siemens cardiac

United Hospital has received a leasing proposal from Leasing, Inc., for a Siemens cardiac catheterization unit. The terms are: - Five-year lease - Annual payments of $200,000 payable one year in advance - Payment of property tax estimated to be $23,000 annually - Renewal at end of year 5 at fair market value Alternative

Journal Entries and Balance Sheet: Cascade Industries and Hardy

(Lessee-Lessor Entries, Balance Sheet Presentation; Sales-Type Lease) Cascade Industries and Hardy Inc. enter into an agreement that requires Hardy Inc. to build three diesel-electric engines to Cascade's specifications. Upon completion of the engines, Cascade has agreed to lease them for a period of 10 years and to assume a

Proper Accounting Treatment for Leases

Your accounting firm has been hired to consult with the Graduate Manufacturing Company (GMC). GMC is preparing its annual financial statements as of December 31. GMC entered into five separate lease arrangements at the beginning of the year. Each lease provides for annual lease payments at the beginning of each year. For e

Business for Huffman Company Leases

1.Huffman Company leases a machine from Lincoln Corp. under an agreement which meets the criteria to be a capital lease for Huffman. The six-year lease requires payment of $500,000 at the beginning of each year, including $25,000 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 12%


Eddy leased equipment to Hoyle Company on May 1, 2008. At that time the collectibility of the minimum lease payments was not reasonably predictable. The lease expires on May 1, 2009. Hoyle could have bought the equipment from Eddy for $3,200,000 instead of leasing it. Eddy's accounting records showed a book value for the equipm

Managerial Accounting for Goetz Company

1. Goetz Company has operating assets of $20,000,000. The company's operating income for the most recent accounting period was $2,640,000. The East Division of Goetz controls $7,500,000 of the company's assets and earned $1,170,000 of its operating income. Goetz's desired ROI is 10 percent. Goetz has $900,000 of additional funds

Methods for Financing Business Operations Presentation

You have been asked to prepare a presentation for the board of directors, regarding the methods for financing business operations. They would like answers to the following questions concerning the use of debt or equity as financing vehicles. What factors would cause our corporate management to obtain cash by issuing bonds, in

Example you are considering purchasing a company - assets, liabilities, warts, and all. You are aware that sometimes liabilities do not always show up on the balance sheet. can you discuss five examples of liabilities that may not be explicitly recognized on the balance sheet, can you explain why they are liabilities.

Example you are considering purchasing a company - assets, liabilities, warts, and all. You are aware that sometimes liabilities do not always show up on the balance sheet. can you discuss five examples of liabilities that may not be explicitly recognized on the balance sheet, can you explain why they are liabilities.

Disclosures Required in Various Situations

Instructions For each of the items below discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered.) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, a

Financial Accounting for Hungry Macs Ltd.

Hungry Macs Ltd is a chain of fast food restaurants and is renewing a restaurant and associated block of land from Red Leasing Ltd. The lease has always been treated as an operating lease however with the only difference this renewal is that the building is set to be demolished at the end of the lease term and land sold to make

WWWeb Marketing Current Policy

Problem 8-12 "WWWeb Marketing" WWWeb Marketing is a decentralized firm specializing in designing and operating Internet marketing web sites. The firm is four years old and has been growing rapidly' but it only shows a small profit. WWWeb has three profit centers: Design Division, Server Operations' and the Crawler Division. T