1(a) As a result of a recent court settlement for a client John earned $300,000 for his law practice LLC. He wants to minimize his tax liability and understand how the IRS will treat this money earned. He lease’s office space for $3,500 per month. He wants to know the advantages in leasing office space versus purchasing the building.
According to ASC 840-10-35-6, leasehold improvements in operating lease are capitalized and amortized over the shorter of (1) the useful life of the assets and (2) lease term, considering required lease periods and renewals. In the lease agreement above, no renewal option is provided; and the lease term of 10 years happens to be the same to the economic useful lives of the leasehold
ACTG 351 HW #1 Answers 1. Curtiss Construction Company, Inc. entered into a fixed-price contract with Axelrod Associates on July 1, 2011, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,000,000. The building was completed on December 31, 2013. Accumulated contract costs incurred, estimated costs to complete the contract, accumulated billings to Axelrod and cash collections from Axelrod under the contract are as follows: 12/31/2011 $350,000 3,150,000 720,000 600,000 12/31/2012 $2,500,000 1,700,000 2,170,000 1,800,000 12/31/2013 $4,250,000 0 3,600,000 3,600,000
While working on a consulting engagement, a supervisor in the team has given an assignment. The client is a regional trucking company. A new customer has approached the client with an opportunity that would require 120 trailers—20 more than the trucking company currently owns. The client is uncertain how long the relationship with the customer may last, but the deal has the potential for significant growth. The supervisor has asked a research to be conducted on leases and lease structure issues on the Financial Accounting Standards Board (FASB) website, in particular the current practice and thought related to direct financing, sales type, and operating leases. This paper is a memo addressed to the supervisor that summarizes
The lease contains an option allowing the Lessee to renew the lease for two years at the expiration of the initial 5-year term. The Lessee must pay a $100,000 termination penalty at the end of the initial
Cost of rent during our first year will be $60,000. Year 2 will be increased to $61,800 and by year 3 it will be $63,654.00. Equipment expense will be year 1- $1,000, year 2-$1,030, and year 3- $ 1,061. Telephone expenses are year 1 -$2,000, year 2- $ 2,060, and year 3-$2,122. Insurance will cost $50,000, for year 2 $51,500 and year 3 $53,045.00. The cost for heat and water will not count in our expenses, as it will be in our contract to have this included within the rent for the first three years. As for Internet and telephone, the cost will be $2,000.00 per year.
He spends $100,000 as the capital expenditure. According to TR97/25, it is a capital work to improve the building’s value. The client pays this expenditure for improving the safety of retaining wall. That is to say, the capital work expenditure enhances the investment property’s value. Also, on the basis of Section110-25, the new wall shows the 4th element of the cost base. The cost base is increasing by $100,000.
ABC, Inc.’s new campus recruiter Carl Robins has found himself to have over looked some important details of his new hires orientation. If he can’t resolve these issues in a timely manner, Carl will not be able to hold orientation June15, like Monica wants. The deadline is closing in and there are some problems that need quick solving, since Carl is new to his position, he is still worried that he may not have the answers to fix the issues at hand. Seems Carl may not have been as organized as he could have been and necessary key aspects are missing. He finds himself frustrated and knows there is very little time to get these things done. Staying focused and calm, while being pro-active will make finding the solutions that much easier.
LL shall provide improvement allowance the sum of $178,225.32 ($60.13 per rsf of the premises) for TT improvements in the premises. If LL contribution amount exceeds the total amount for improvement allowance, then all excess costs shall be paid to LL by TT in advance within 5 days. Any portion of of the LL contribution amount be available for disbursement by LL in connection of the improvements 9 months after the date of lease.
As a team, we chose to look at the lease purchase model for the consumers which is a part of our KPI’s, to improve profit gain from long-term leasing options. Dictionary.com states that a leasing “a contract or instrument conveying the property to another for a specified period or a period determinable at the will of either lessor or lessee in consideration of rent or other compensation.” Aarons pride themselves as “(NYSE: AAN), a leading omnichannel provider of lease-purchase solutions.” (“Press Release-Aaron’s,” n.d.) The publicly traded company this group has selected is Aaron’s. Our team is defining the purpose of Aaron’s Rental Company as, “Business analytics are purposeful when we know why we create the information and perform the analytic
One aspect of this can be seen in the simplified break down of the qualifications in determining between an operating lease and a capital lease. This is very important since the determination of a lease agreement will decide on whether an asset and liability are included on the balance sheet or if it should only be footnoted within the financial statements. A current proposal for lessees, would require the recognition of a right-of-use (ROU) asset and a lease liability in the balance sheet, regardless of whether the lease would have been considered a capital or operating lease