Answer:
B. Increases the expected present value of lease cash flows to the owner
Explanation:
A lease option gives a right but not the obligation to the renter of the property to buy the said property at today's current market price upon the expiry of lease term.
Lease option is similar to an option contract, the difference being, here instead of securities, leased property serves as the underlying asset and instead of option premium, the renter pays a premium each year in addition to the rental charges.
Lease cash flows refer to the present value of future cash flows which the lessor/owner receives in the form of lease rentals plus the added premium each year.
The more the benefits under lease option clause, the higher the premium charged and thus, more would be the future receipts of owner which would increase the expected present value of lease cash flows to the owner.
Answer:
a. $32,300
b. $32,900
Explanation:
The computation of given question is shown below:
a. Cash basis net income is
= Collection from customers - Paid expenses
= $104,000 - $71,700
= $32,300
b. Accrual-basis net income
= Service Performed - Incurred Expenses
where,
Service performed is
= $104,000 - $25,500 + $38,600
= $117,100
And, the expenses incurred is
= $71,700 - $30,400 + $42,900
= $84,200
So, the net income under accrual basis is
= $117,100 - $84,200
= $32,900
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After determining the marginal cost and the marginal benefit of an option, the next step is to DECIDE WHICH IS GREATER: MARGINAL COST OR MARGINAL BENEFIT.
If the marginal benefit is greater than the marginal cost, then it is better to proceed with the option.
If the marginal cost is greater than the marginal benefit, then it is better to retain the status quo.
Answer:
Explanation:
The journal entries are shown below:
1. Petty cash A/c $1,100
To Cash A/c $1, 100
(Being the petty cash fund is established)
2. Office supplies A/c Dr $614
Miscellaneous selling expense A/c Dr $200
Miscellaneous administrative expense A/c Dr $145
Cash short and over A/c $26
To Petty cash A/c $985
(Being the expenses are recorded)
The Cash short and over is computed below:
= $1,100 - $115- $614 - $200 - $145
= $26