A company manufacturing high precision polycarbonate plastic lenses wants to expand its manufacturing operations. The company is financially reasonably sound and has sufficient funds for the expansion. For purchase of machinery, the management has two options Option 1: Purchase new machinery by taking a bank loan Option 2: Purchase second-hand used machinery by utilizing its own funds Is it advisable for the company to purchase used equipment / machinery? What are the sources of used equipment / machinery?
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A company manufacturing high precision polycarbonate plastic lenses wants to expand its manufacturing operations. The company is financially reasonably sound and has sufficient funds for the expansion. For purchase of machinery, the management has two options
Option 1: Purchase new machinery by taking a bank loan
Option 2: Purchase second-hand used machinery by utilizing its own funds
Is it advisable for the company to purchase used equipment / machinery? What are the sources of used equipment / machinery?
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- Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance itsgrowth. The bank requires financial statements before approving the loan.Required:Classify each cost listed below as either a product cost or a period cost for the purpose of preparing financial statements for the bank.1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory…Radley Co. is growing its business and is currently deciding how to finance this programme. Following some research, the business decides that it can either (1) issue bonds and use the money to buy the necessary assets, or (2) lease the assets for an extended period of time. Please respond to the following questions without understanding the relative costs involved: a. What benefits might leasing the assets have over purchasing them? b. What drawbacks can leasing the assets have in comparison to buying them? c. How would leasing the assets vary from issuing bonds and buying the assets in terms of how it will impact the Statement of Financial Position?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?
- _ Since prices are extremely low, the Pipeline SupplyCompany wants to purchase a special line of pipesfrom a company going out of business. Pipeline,however, will need to borrow money to make thisdeal. Which assets will Pipeline most commonlypledge as collateral for this short-term loan?a. delivery equipmentb. notes payablec. manufacturing equipmentd. owners’ equitye. inventoryIn the picture below, Determine whether long-term or short-term financing is required Acquisition of equipment Franchise of fast-food outlet Emergency loans Housing loan Loan for sari-sari supplies Loan for agricultural needs for crop production Purchase of inventory for a clothing shop Loans for purchase of a commercial space Development of a subdivision Auto-loanCordell Construction needs a piece of equipment that can be leased orpurchased. The equipment costs $100. One option is to borrow $100 from the local bankand use the money to buy the equipment. The other option is to lease the equipment. Thecompany’s balance sheet prior to the equipment purchase or lease is shown below:What would be the company’s debt ratio if it chose to purchase the equipment? Whatwould be the company’s debt ratio if it leased the equipment and it could keep the leaseoff its balance sheet? Is the company’s financial risk any different whether the equipmentis leased or purchased? Explain.
- Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The bank requires financial statements before approving the loan. Required: Classify each cost listed below as either a product cost or a period cost for the purpose of preparing financial statements for the bank. Costs Product Cost / Period Cost 1. Depreciation on salespersons’ cars. 2. Rent on equipment used in the factory. 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors’ salaries. 7. Heat, water, and power consumed in the factory. 8. Materials used for boxing products for shipment overseas. (Units are…Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank. Costs Product Cost/Period Cost 1. Depreciated on salesperson's cars 2. Rent on equipment used in the factory 3. Lubricants used for machine maintenance 4. Salaries of personnel who work in the finished goods warehouse 5. Soap and paper towels used by factory workers at the end of a shiftSuppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank. Cost Product Cost/Period Cost 1. Factory supervisors' salaries 2. Heat, water, and power consumed in the factory 3. Materials used for boxing products for shipment overseas. Units are normally boxed. 4. Advertising costs 5. Workers' compensation insurance for factory employee
- Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank. Cost Product Cost/Period Cost1. Depreciation on chairs and tables in the factory lunchroom 2. The wages of the receptionist in the administrative offices 3. Cost of leasing the corporate jet used by the company's executives 4. The cost of renting rooms at a Florida resort for the annual sales conference 5. The cost of packaging the company's productWhich company will need long-term funds? Multiple Choice A computer company wants to expand its business by acquiring a software training company. While filling a crucial order, a piece of the company’s equipment needed emergency repairs. A new grocery chain opened up and ran a temporary promotional program to get shoppers into the store. A local gift shop has a poorly managed inventory that is seriously affecting its cash flow.Suppose that you have been given a summer job as an intern at Issac Aircams, a company that man- ufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs: Depreciation on salespersons’ cars. Rent on equipment used in the factory. Lubricants used for machine maintenance. Salaries of personnel who work in the finished goods warehouse. Soap and paper towels used by factory workers at the end of a shift. Factory supervisors’ salaries. Heat, water, and power consumed in the factory. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) Advertising costs. Workers’ compensation insurance for factory employees. Depreciation on…