Early termination of finance leases by lessees In in above there is effectively a guarantee of a residual of €3,000 dependent on the mileage done by the leased vehicle. Assuming that the lease is capitalised as a finance lease, if the lessee considers at the lease inception that the guarantee will not be called on, then he will depreciate the vehicle to an estimated residual […]

An entity agrees to enter into a new lease arrangement with a new lessor. As an incentive for entering into the new lease, the lessor agrees to pay the lessee’s relocation costs. The lessee’s moving costs are €1,000. The new lease has a term of 10 years, at a fixed rate of €2,000 per year. The lessee recognises relocation costs of €1,000 as an expense […]

Sale and finance leaseback – accounting for the excess sale proceeds An asset that has a carrying value of €700 and a remaining useful life of 7 years is sold for €1,200 and leased back on a finance lease. This is accounted for as a disposal of the original asset and the acquisition of an asset under a finance lease for €1,200. The excess of […]

Tran Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock. Feb. 1 Issued 20,000 shares for cash at $53 per share. July 1 Issued 12,000 shares for cash at $57 per share. Instructions (a)Journalize the transactions. (b)Post […]

Sale and leaseback transaction involving escalating rentals and call options Company S sells a property to Company B for £100,000,000 and leases it back on the following terms: Rental for years 1 to 5 £3,900,000 per annum Rental for years 6 to 10 £5,875,000 per annum Rental for years 11 to 15 £8,830,000 per annum Rental for years 16 to 20 £13,280,000 per annum Rental […]

Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received. Assume Bank A makes a loan in the amount that can be “safely lent.” Show what the bank”s balance sheet of assets and liabilities would look […]

Government grant by way of forgivable loan An entity participates in a government sponsored research and development programme under which it is entitled to receive a government grant of up to 50% of the costs incurred for a particular project. The government grant is interest-bearing and fully repayable based on a percentage (‘royalty’) of the sales revenue of any products developed. Although the repayment period […]

Assume that there are two banks, A and Z, in the banking system. Bank A receives a primary deposit of $600,000, and it must keep reserves of 12 percent against deposits. Bank A makes a loan in the amount that can be safely lent. Show what Bank A”s balance sheet of assets and liabilities would look like immediately after the loan. Assume that a check […]

PSA Peugeot Citroën (2009) Half-Year Financial Report 2009 [extract] 17.2. REFINANCING TRANSACTIONS [extract] – EIB loan In April 2009, Peugeot Citroën Automobiles S.A. obtained a 400 million 4-year bullet loan from the European Investment Bank (EIB). Interest on the loan is based on the 3-month Euribor plus 179 bps. At June 30, 2009 the government bonds (OATs) given by Peugeot S.A. as collateral for all […]

The bank has loan-loss reserves of $10 million. The real estate and commercial loans shown on the balance sheet are net of the loan-loss reserves. a. Calculate the equity capital ratio. How could the bank increase its equity capital ratio? b. Risk-adjusted assets are estimated using the following weightings process: cash and government securities =.00; real estate loans =.50; commercial and other loans = 1.00. […]