Case Summary:
LS Inc wants to acquire new market data and quotation system for its new home office. The system receives the information from online services and display the data onscreen or may save it for later retrieval and system also allow customers to make call and can convey current quotes. Cost of the equipment is $ 1,000,000 and if the company wants to purchase the equipment, they can borrow a loan at an interest rate of 10%.
Useful life of equipment is 6 years and it comes under 3 years MARCS class or it can purchase a contract of 4 years where $20,000 have to be paid at the beginning of each year and it will be sold after 4 years and the residual value is estimated at $200,000. They thought of opting for leasing which will cost $260,000 and includes maintenance cost. Federal plus state tax is 40%.
To analyze: Lessor should write the lease or not.
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EBK FINANCIAL MANAGEMENT: THEORY & PRAC
- What would be the advantages and disadvantages of leasing assets instead of owning them? How would the financial statements be different in a leasing situation (for both operating leases and finance leases) for the lessee? What about the lessor (including all of the types)? What disclosures should be made by lessees and lessors related to future lease payments?arrow_forwardA salesperson is selling a leased commercial property. what will happen to the lease after the sale is consummated ? A. the lease is assigned to the new owner ? b. the mease expires and the tenanr must move.? c . the tenant and the new owner must negatiate a new lease ? d. the new owner has the option of canceling the lease or accepting the lease .arrow_forwardExplain when and how a lessee accounts for a lease by the short-cut method.arrow_forward
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- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning