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Long-Term Asset

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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 borrowing rate (discount rate) is 10%. If the lease is recorded as a capital lease, what will be the long-term asset total?

A) about 285,131
B) about 274,868
C) about 250,000
D) about 296,321

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C) about 250,000

This is a trick question. The question wants the total of long term assets, ...

Solution Summary

This solution calculates the exact long-term asset total for JK Company.

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Financial Ratio Analysis

Using the attached case, answer the following questions:

1. How does Quickfix's average compound growth rate in sales compare with its earnings growth rate over the past five years?

2. Which statements should Juan refer to and which one's should he construct so as to develop a fair assessment of the firm's financial condition? Explain why.

3. What calculations should Juan do in order to get a good grasp of what is going on with Quickfix's performance?

4. Juan knows that he should compare Quickfix's condition with an appropriate benchmark. How should he go about obtaining the nesessary comparison data?

5. besides comparison with the benchmark, what other types of analyses could Juan perform to comprehensively analyze the firm's condition? Perform the suggested analyses and comment on your findings.

6. Comment of Quickfix's liquidity, asset utilization, long-term solvency, and profitability ratios. What areguments would have to be made to convince the bank that they should grant Quickfix the loan?

7. If you were the commercial loan officer and were approached by Andre for a short-term loan of $25,000, what would your decision be? Why?

8. What recommendations should Juan make for improvement, if any?

9. What kinds of problems do you think Juan would have to cope with when doing a comprehensive financial statement analysis of Quickfix Auto Parts? What are the limitations of financial statement analysis in general?

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