Describe two advantages of leasing a car over buying one.Select all that apply.O A. When the lease ends, you own the car.O B. There are no penalties for ending a lease early.O C. Leasing covers the maintenance.O D. Leases require only a small down payment, or no down payment at all.O E. Lease payments for a new car are lower than loan payments for the same car.

Lease refers renting of an asset. Leasing companies finance the vehicle that a person wants to buy,…

Answered: Describe two advantages of leasing a…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 1C

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: Why might a business owner choose a gross lease over a net or percentage lease? a) You won't be responsible for any expenses. b) You'll be responsible for some expenses but the rent amount will be consistent. c) You won't have to pay as much in times where sales are slow. d) You'll own the space outright and have total control.
Sandy is nearing the end of her closed-end lease for her Ford Escape. She will not exceed her allocated miles and the car is in very good shape. Which lease component will amount to the total money she will have paid to the dealer? A : All the choices combined B : Capitalized cost reduction C : Rent charge D : Up-front fee
You are considering either leasing or purchasing a car. You notice an ad that says you can lease the car you want for $616.00 per month. The lease term is 48 months with the first payment due at inception of the lease. You must also make an additional down payment of $1,340. The ad also says that the residual value of the vehicle is $21,937. The list price of the vehicle is $36,624, but after much research, you have concluded that you could buy the car for a total "drive-out" price of $33,600. What is the quoted annual interest rate you are actually paying with the lease?
Operations Management James is taking courses during the first half of Summer Semester at Ohio University, and he needs a car to use while he is in Athens for the summer. Laura is taking classes abroad during the summer, and she agrees to lease her car to James. Laura tells James they can figure out how much the lease will cost at the end of the summer when she returns. Under the UCC, this lease would not valid without a negotiated price and length of the lease. True False Why??
Using the attached exhibit and the information below, what is the net cost of purchasing this vehicle?To answer the question, use the following assumptions:● The price of the car is $20,000.● The down payment required is $2,000● The security deposit required is $500● The sales tax rate is 10.25%%. Round to the nearest cent. DO NOT INCLUDE COMMAS OR $.● GAP insurance on the lease is $300�� Interest lost or foregone is computed using a 4% after tax rate of return (use in Step 4)● The interest rate on the lease and loan is 9% (use in Step 6).● The lease and loan terms are both 36 months.● Your resale/trade-in value for your vehicle is $6,000● Disposition fee: $250● Lease Payment: $325/ month● Purchase Payment: $360/month
The lessee compares the present value of owning the equipment with the present value of leasing it. Now put yourself in the lessor’s shoes. In a few sentences, how should you analyze the decision to write or not to write the lease?
You are interested in selling your old car. A friend has offered to buy it for $3,500. You are satisfied with the deal because you would not be willing to pay more than $3,000 for it given its current condition. After reviewing the car market, you were sure no one would be willing to pay more than $3,200 for the car. What is the fair market value of the car?
You are ready to make a new car purchase and the manufacturer is offering a 60-month, zero percent interest loan, or, a $1,500 cash rebate. The price of the car is $25,000. Which option should you choose? a. $1,500 cash rebate b. Not enough information to make the decision. c. Negotiate to get both d. Zero percent loan e. None of the answers are correct
Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the equipment or borrow 200 from a local bank and buy the equipment. Reynoldss balance sheet prior to the acquisition of the equipment is as follows: a. (1) What is RCs current debt ratio? (2) What would be the companys debt ratio if it purchased the equipment? (3) What would be the debt ratio if the equipment were leased and the lease not capitalized? (4) What would be the debt ratio if the equipment were leased and the lease were capitalized? Assume that the present value of the lease payments is equal to the cost of the equipment. b. Would the companys financial risk be different under the leasing and purchasing alternatives?
Does the levered IRR meet the tenant's stated required yield? Note: - This is the metric you use to answer the question, "Is it better for the tenant to lease or buy with mortgage financing? - If the levered IRR exceeds her required yield, then she is better off buying with a mortgage instead of leasing. If it less than her hurdle rate, then she should renew the lease instead of buying.
Compare the cost of the following leasing agreement with the finance charge on a loan for the same time period: The value of the car is $15,000 at the beginning of the lease period, and its projected residual value at the end of three years is $4,000. The lease requires a $500 down payment. Monthly payment $315 Acquisition fee $300 Disposition charge $150 Other things being equal, one would want to finance this car rather than take this lease if the finance cost were equal to or less than?
The figure below shows costs for a current home mortgage versus a refinanced home mortgage. Refinancing has initial costs, but results in a lower monthly payment. Which best describes the lines? A) the blue line is for refinancing, which start cheaper but eventually is costlier B) the blue line is for refinancing, which starts costlier but eventually is cheaper B) the orange line is for refinancing, which starts cheaper but eventually is costlier D) the orange line is for refinancing, which starts costlier but eventually is cheaper

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