Reference no: EM132538619
Automobiles are often leased, and there are several terms unique to auto leases. Suppose you are considering leasing a car. The price you and the dealer agree on for the car is $31,400. This is the base capitalized cost. Other costs that may be added to the capitalized cost price include the acquisition (bank) fee, insurance, or extended warranty. Assume these costs are $1,200. Capitalized cost reductions include any down payment, credit for a trade-in, or dealer rebate. Assume you make a down payment of $3,000 and there is no trade-in or rebate. If you drive 12,000 miles per year, the lease-end residual value for this car will be $24,400 after three years.
The lease or "money" factor, which is the interest rate on the loan, is the APR of the loan divided by 2,400. The money factor of 2,400 is the product of three numbers: 2, 12, and 100. The 100 is used to convert the APR, expressed as a percentage, to a decimal number. The 12 converts this rate to a monthly rate. Finally, the monthly rate is applied to the sum of the net capitalization cost plus the residual. If we divide this sum by 2, the result is the average anticipated book value. Thus, the end result of the calculation using the money factor is to multiply a monthly rate by the average book value to get a monthly payment. The lease factor the dealer quotes you is .00259.
The monthly lease payment consists of three parts: Depreciation fee, finance fee, and sales tax. The depreciation fee is the net capitalized cost minus the residual value divided by the term of the lease. The finance fee is the net capitalization cost plus the residual times the money factor, and the monthly sales tax is the monthly lease payment times the tax rate.
a. What APR is the dealer quoting you? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is your monthly lease payment for a 36-month lease if the sales tax is 7 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
|
Determine the second-year depreciation
: Computer equipment was acquired at the beginning of the year at a cost of $60,443, Determine the second-year depreciation
|
|
Why ending inventory must be reported by lower of cost
: Why ending Inventory must be reported by lower of cost or Market LCM. What is the effects of Inventory errors on financial statements.
|
|
How should problem be economically and effectively corrected
: Your paper should be 5+ pages, single spaced using a 12 point font, with not more than ½ of 1 page used for instructive images. At the top left of your paper.
|
|
Discuss the issue as to the deductibility of management fee
: With reference to the relevant legislation and case law, discuss the issue as to the deductibility of the management fee to William and bank interest charges
|
|
What apr is the dealer quoting you
: What APR is the dealer quoting you? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
|
|
Capitalism is economic and political system
: Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit,
|
|
Discuss the tax consequences arising from the disposal
: With reference to the relevant legislation and case law, discuss the tax consequences arising from the disposal of the old machinery under the prime cost method
|
|
Concerning scenario analysis is correct
: Which one of the following statements concerning scenario analysis is correct?
|
|
Prepare statement of corrected net profit
: Journal entries to correct the errors. Prepare Statement of corrected net profit. The trial balance of S Juma, a sole trader, did not balance on 30 April 1995.
|