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Morgarella [4.7K]
3 years ago
10

A landlord entered into a 10-year lease of a building with an auctioneer, who planned to use the building itself for a storage a

rea and the covered porch at the front of the building for auctions. A term in the auctioneer’s lease stated, "Lessor agrees to maintain all structures on the property in good repair." Four years into the lease, the landlord sold the property to a buyer. The buyer did not agree to perform any obligations under the lease. As instructed, the auctioneer began paying rent to the buyer. In the fifth year of the lease, the porch roof began to leak. Citing the lease terms, the auctioneer asked the buyer to repair the roof. He continually refused to do so. The auctioneer finally repaired the roof herself at a cost of $2,000. The auctioneer then brought an appropriate lawsuit to recover the money. Absent any other facts, what is the auctioneer likely to recover?
Business
1 answer:
ArbitrLikvidat [17]3 years ago
8 0

Answer:

$2,000

Explanation:

Usually, the landlord is required to notify the tenant if he/she plans to sell the property, but regardless of who owns the property (the original landlord or  a new landlord), the contract terms are valid and must be honored by both the current landlord and the tenant.

The new owner immediately became the new landlord and he/she assumed all the responsibilities stated in the lease contract. Since the lease contract stated that the "lessor (landlord) agreed to maintain all structures on the property in good repair", the new landlord must pay for any necessary repairs.  

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An asset falling under the MACRS five-year class was purchased three years ago for $200,000 (its original depreciation basis). C
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Answer:

(a) The cash flows is $59,040.

(b) The cash flows is $71,040.

Explanation:

From the  Modified Accelerated Cost Recovery System (MACRS) Tables, the depreciation rates for the first 3 years for an asset falling under the MACRS five-year class are 20%, 32% and 19.2%. Therefore, we have:

Accumulated depreciation rate = 20% + 32% + 19.2% = 71.20%

Accumulated depreciation = Cost of the asset * Accumulated depreciation rate =  $200,000 * 71.20% = $142,400

Net book value of the asset = Cost of the asset - Accumulated depreciation = $200,000 - $142,400 = $57,600

We can now proceed as follows:

(a) Calculate the cash flows if the asset is sold now at $60,000

Capital gains = Sales proceeds - Net book value = $60,000 - $57,600 = $2,400

Capital gains tax = Capital gains * Tax rate = $2,400 * 40% = $960

Net sales proceeds = Sales proceeds - Capital gains tax = $60,000 - $960 = $59,040

Therefore, the cash flows is $59,040 net sales proceeds.

(b) Calculate the cash flows if the asset is sold now at $80,000

Capital gains = Sales proceeds - Net book value = $80,000 - $57,600 = $22,400

Capital gains tax = Capital gains * Tax rate = $22,400 * 40% = $8,960

Net sales proceeds = Sales proceeds - Capital gains tax = $80,000 - $8,960 = $71,040

Therefore, the cash flows is $71,040 net sales proceeds.

3 0
3 years ago
Voluntary exchanges happen when both parties expect to
zimovet [89]
Voluntary exchanges happen when both parties expect to receive a gift that is better than the gift they already gave to somebody.


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3 years ago
Can anyone please tell me the right answer
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Commit to buy more in the future
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At March 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an ex
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Answer:

A and B

Explanation:

A) income statement

insurance expense-understand net income-overstated

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Help them evaluate the business' growth

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