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Serjik [45]
2 years ago
11

Rauch Inc. leases a piece of equipment to Donahue Corp. on Jan 1 2017. The lease agreement called for annual rental payments of

$4892 at the beginning of each year of the 4 year lease. The equipment has an economic useful life of 6years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.
1. Suppose the instead of $8,250, Rauch expects the residual value at the end of the lease to be $5,000, but Donahue agrees to guarantee a residual value of $8,250. All other facts being eqaul, how would Rauch change the amount of the annual rental payments, if at all?

2. Explain how a fully guaranteed residual value by Donahue would change the accoutning for Rauch, the lessor.

3. Explain how a bargain renewal option for one extra year at the end of the lease term would change the accounting of the lease for Rauch, the lessor.
Business
1 answer:
Eduardwww [97]2 years ago
4 0

Answer:

Explanation:

1. Suppose the instead of $8,250, Rauch expects the residual value at the end of the lease to be $5,000, but Donahue agrees to guarantee a residual value of $8,250. All other facts being eqaul, how would Rauch change the amount of the annual rental payments, if at all?

<em>A lower residual value means the car is expected to hold its value less (depreciate more) over the lease term. </em>

<em>Therefore, since most of the lease payment covers the cost of depreciation., more depreciation (or lower residual value) will most likely result into higher monthly payments over the lease term.</em>

<em />

2. Explain how a fully guaranteed residual value by Donahue would change the accounting for Rauch, the lessor.

<em>The financial accounting term </em><em><u>guaranteed residual value</u></em><em> has to do with an additional payment made by a lessee in property, cash, or both at the termination of the lease. </em>

<em>Therefore since Guaranteed residual values are financial commitments made by the lessee, they are factored into the calculation of the minimum lease payment.</em>

<em />

3. Explain how a bargain renewal option for one extra year at the end of the lease term would change the accounting of the lease for Rauch, the lessor.

<em>A bargain renewal option is a clause in a lease contract that gives the lessee the option of extension of the term of the lease at a substantially lower trate than the going market rate. </em>

<em>The presence of this clause in a lease contract will most likely imply that the lease will change to a finance lease rather than an operating lease</em>

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The answer is: satisfying customer needs and wants.

<h3>What Distinguishes Needs from Wants?</h3>

One of the most crucial tasks you must take when building a monthly budget is classifying your expenditures by "need" or "desire" status.

The distinction between a need and a want might vary from person to person, making it one of the hardest challenges. It is also simple to mistake requirements for wants if you have been accustomed to something to the point that it is difficult to imagine life without it.

You classify your expenditure on the budgeting worksheet as either needs or wants. By doing this, you may distinguish between the expenses that are absolutely necessary for your existence and well-being (what you need) and those that are only desirable but not necessary (wants).

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1 year ago
On December 31, 2017, Ivanhoe Company had $1,313,000 of short-term debt in the form of notes payable due February 2, 2018. On Ja
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Answer:

They should be reported in 2 different parts, first under current liabilities as:

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Then under long term liabilities:

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Explanation:

the total short term notes payable on December 31 = $1,313,000

  • $1,044,000 were paid off by issuing common stocks, so that portion of the debt must be reported as notes payable expected to be refinanced (or refinanced debt)
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Fed up with her working conditions at the call center, Lisa decides to invest in a state-of-the-art sewing machine and produce l
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Complete Question:

Fed up with her working conditions at the call center, Lisa decides to invest in a state-of-the-art sewing machine and produce limited quantities of her own clothing designs. After a few months of operation, she decides to apply some of the forecasting techniques she mastered in school. Which of these statements about her forecasts is correct?  

  1. Her forecasts will probably be 100% accurate.
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  3. Her demand forecasts for each style of skirt will be less accurate than her demand forecasts for all skirts.
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Answer:

Option 4 is the correct answer

Explanation:

Because the only best way to forecast the amount of fabric required for the is dependent upon the number of customer orders for each type of skirt she receives.

Remember that the forecasting cannot be 100% correct because we human and we cannot tell the future with 100% surety. All we can do is guessing what would happen.

With the help of past data we can better estimate the demand. As their is no past data available we can make a reliable forecast of the skirt sales.

Option 3 is also incorrect because forecasting is dependant upon the reliable source of information which helps in estimating what would happen. Estimating single or combined sales is not a reliable source of information.

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Three types of financial assistance that can be applied for after Grade 12​
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You work for Athens Inc. and you must estimate the Year 1 operating cash flow for a project with the following data. What is the
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Answer:

a) $7,250

Explanation:

First, find the Earnings Before Interest and Taxes (EBIT):

EBIT = \$15,000-\$4,000-\$6,000\\EBIT = \$5,000

Then, apply taxes to the EBIT:

E = EBIT*(1-0.35)=\$5,000*0.65\\E=\$3,250

Finally, Since depreciation is not an operating expense, add it to the earnings to find the operating cash flow (OCF):

OCF = \$3,250+\$4,000\\OCF = \$7,250

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