Jim owns a lawn care service. He would like to obtain a new heavy duty trailer...

Jim owns a lawn care service. He would like to obtain a new heavy duty trailer to haul his equipment and materials from job to job. He’s found one that will suit his needs. The purchase price is $8,500. Jim is in a 28% tax bracket and sales taxes are 5%. The cost of capital for Jim to purchase the trailer is 8%. The trailer qualifies for 5 year MACRS depreciation method. Jim intends on using the equipment for 60 months. The salvage value of the trailer at the end of the use period is $4500. Jim has also found a dealer that is willing to lease the trailer to him for 60 months for $150 per month. The lease payments would be due at the beginning of the month. Determine if Jim should lease or buy this trailer.

1-What is the total economic depreciation benefit for all 5 years? (include taxes)

2-What is the Book Value at the end of year 5?

3-What is the total depreciation benefit [PW(8%)]?

4-What is the taxable gains or (loss) tax on the sale of the equipment?

5-What is the PW of the net proceeds from the sale?

6-What is the total cost of the buy decision?

7-Should Jim lease or buy this trailer?

Expert Solution

Rahul Sunny answered 2 years ago

17) Jim owns a lawn care service. He would like to obtain a new heavy duty...

17) Jim owns a lawn care service. He would like to obtain a new heavy duty trailer to haul his equipment and materials from job to job. He’s found one that will suit his needs. The purchase price is $8,500. Jim is in a 28% tax bracket and sales taxes are 5%. The cost of capital for Jim to purchase the trailer is 8%. The trailer qualifies for 5 year MACRS depreciation method. Jim intends on using the equipment for...

Ace Lawn Care Module 4 Mini Practice Problem In June, Jim commented to you that he...

Ace Lawn Care Module 4 Mini Practice Problem In June, Jim commented to you that he could never figure out his bank statement, “it never matches the balance in my accounting records” he tells you. So you explain that a bank reconciliation is a tool used to balance the bank statement to the accounting books. He gives you his bank statement for June, 2014 (shown below). The general ledger shows a balance for the account cash of $19,319.00 on June...

Your client would like to subdivide his property into 60-acre parcels. He owns the NE ¼...

Your client would like to subdivide his property into 60-acre parcels. He owns the NE ¼ of section 12, and the S ½ of the NW ¼ of section 12. Diagram a solution for the subdivisions?

Your company purchases a new heavy-duty truck. It has an initial cost of $50,000 and maintenance...

Your company purchases a new heavy-duty truck. It has an initial cost of $50,000 and maintenance will be provided by the dealer at no additional charge for the first 3 years. At the end of year 4 maintenance cost is estimated to be $2,000 increasing at 10 percent per year thereafter for an additional 4 years. You estimate the additional revenues to the company due to the use of the new heavy-duty truck to be $8,000 end of years 1...

Q1: How would you explain the “Duty of Care” of the Design Engineer to a marketing...

Q1: How would you explain the “Duty of Care” of the Design Engineer to a marketing executive, or to a legal representative, or to a business manager? Is there one explanation that all could understand and agree? Q2: Why is it important to follow the Engineers Australia Code of Ethics in your engineering design work? Is there less need to abide by the Engineers Australia Code of Ethics if you are not a member of Engineers Australia?

Andrew Sinclair operates a lawn care business. He offers customers a choice of two services. The...

Andrew Sinclair operates a lawn care business. He offers customers a choice of two services. The first service, basic lawn care, includes mowing and trimming of all lawn areas. Andrew bills these customers $37 per hour, and his variable cost for providing this service is $25 per hour. Andrew also offers deluxe lawn care services, which includes flower bed maintenance in addition to basic lawn care. He bills his customers $68 per hour for this service, and his variable cost...

1. Jim Harvey, your client, owns a life insurance policy on his own life. He has...

1. Jim Harvey, your client, owns a life insurance policy on his own life. He has paid $6,500 in premiums, and the cash surrender value of the policy is $25,000. Jim Harvey borrowed $25,000 from the insurance company, using the cash surrender value as collateral. He is considering canceling the policy in payment of the loan. Jim Harvey would like to know the federal income tax consequences of canceling his insurance policy. Discuss the tax implications. 2. As we know,...

Jeremy would like to retire in 25 years. He would like his retirement income to be...

Jeremy would like to retire in 25 years. He would like his retirement income to be $250,000, and this figure should grow at the same rate as inflation, expected to be 2 percent annually. He expects to live 30 years after he retires, and plans to leave $3 million to TYU after he dies. Jeremy currently has $1,000,000 in his retirement fund. The fund is expected to earn 6 percent annually. Assuming that Jeremy increases his annual retirement savings by...

In Java Part A Fred would like to sell his apartment. He would like to figure...

In Java Part A Fred would like to sell his apartment. He would like to figure out how much money he will spend at the closing. His lawyer needs to be paid $1,800 for his services. He needs to pay the co-op $500. Sellers pay a state and city combined transfer tax of 1.825 percent if the sale price is over $500,000 or 1.4 percent for deals under $500,000. The broker will collect 15% of the sale price at closing....

Billy is a resident of Oklahoma. He is terminally ill and in pain. He would like...

Billy is a resident of Oklahoma. He is terminally ill and in pain. He would like his physician to prescribe medications to cause a quick, painless death. Billy’s physician refuses to do so, because under the state law, physician-assisted suicide is a felony. Billy challenges the law in court, arguing that the state law violates the U.S. Constitution. Is he right? Why or why not? Select one: a. No, because the U.S. Supreme Court has held that states can choose...

Question