Blades, Discussion 5

747 Words Nov 13th, 2013 3 Pages
-Lease vs. buy decision? Capital equipment is necessary for Granny’s Greenhouse to operate, the actual greenhouse. The greenhouse will have its own heating and cooling features to maintain a steady growing temperature. The cooling system works by running water down the glass panes that have fans blowing air on the water to evaporate, thus cooling the interior. (Priest, 2013) Additional equipment will include computers, pumps, tanks, etc. The total cost is $150 thousand financed at 6% which will fall under an operating budget expense. The financing is a 5 year lease with a zero buyout at the end; which is essentially a loan because even though it is structured as a lease, Granny’s Greenhouse will own the equipment at the end of the …show more content…
(Priest, 2013)
Granny’s Greenhouse does not perceive a need to fund the project by issuing bonds or stocks. Based on the projected net income, Granny’s will have positive cash flow of almost $66 thousand already by the sixth month of operation. In other words, retained earnings will be more than enough to fund business operations. Assets will increase within the first year and surplus funds will be invested conservatively to draw on when needed. Due to high margins and a strong contract with Whole Foods guaranteeing that the tomatoes will be purchased; the bank is willing to finance the operation even in today’s difficult climate. (Priest, 2013)

Harsha’s touched up section
If this is a new business, what is the legal structure and what method of accounting (Cash Method versus Accrual Method) will you use and why?
[Insert company name here] will initially start as a small operation, consisting of 1 greenhouse facility operated by a single owner, producing for a small market, and resembling a limited liability company (LLC). While run by one person, there will be employees which necessitate the creation of the LLC. This type of formation will remove much of the liability from the owner should the venture fail. All business income will be claimed under Granny’s Greenhouse’s
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