ACC 100 Lecture Notes - Lecture 12: Car Dealership, Retained Earnings, Income Statement

82 views23 pages

maroongoat403

21 Apr 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

This review package is intended to test your understanding of some of the concepts in the chapters covered by the final exam (chapter 1 to 9). In no way is this package intended as a comprehensive review. This review package does not cover every concept from every chapter. There are concepts that will be tested which have not been reflected in this review package. This package is intended as additional practice only and students should make no assumptions about the final exam based on the questions included in this final. Students should review the contents of every chapter and the end of chapter practice questions for a more comprehensive review of all concepts in the course to date. Solutions to the final exam review package will not be released. Students are expected to attend class in order to check their solutions to this review package. Students are encouraged to print off this review package and work on.

Related Questions

Feasibility Study and Business Plan Development:

One vehicle for acquiring an understanding of the entrepreneurial process is through the preparation of a start-up business plan. The focus of this experience is to select a concept and create a complete and persuasive business plan. Writing a business plan requires you to ask tough questions about the nature of the business.

What are the benefits of your product or service?

What is the target market and how will you penetrate it?

How will you develop and produce the product or service?

What is required from the management team?

What are the risks of the venture and what can you do to reduce them?

What are the financial implications of the plan?

What resources, including funding, are required to successfully create the business plan?

To understand the related entrepreneurial process, students will take a hands-on approach. Students will decide upon a concept and develop a feasibility study after being approved. Based on that work, you will develop a comprehensive business plan. In most cases, the primary objective of your business plan will be to receive funding if you want to become an entrepreneur. Your plan will be prepared in three phases and you will submit the plan as a written and soft document and present it to the class.

Phase 1: Concept Approval â The initial task is to select and propose a business idea to the instructor for approval. ( Project type is Beauty Salon ).

Phase 2: The Feasibility Plan â This experience begins with the creation of a feasibility plan. This will evolve into a business plan that will be a tool to assist you to put the concepts we have addressed in class in action. Resources will be provided to help you with the plan, including software that can assist you through the process. After you propose and select the type of business and begin the process of assessing its feasibility and potential, the objective is to make this a positive, obtainable, and valuable experience.

Phase 3: The Business Plan â The course is designed to provide resources to assist you throughout the development of the plan. This includes the opportunity to review previous plans. You can âapproachâ a mentor that will be an industry or subject matter expert to assist you with the planning process.

The Written Plan: The body of the written business plan should be no more than 25 pages including the executive summary and all financial statements. The business planâs financial section will include a complete set of financial statements (income statement, balance sheet, cash flow) for the initial three to five years of the venture. An assumption list will accompany the statements. Detailed spreadsheets and appendices can follow the text; however, the total plan should not exceed 30 pages.

Plans must include an explanation of the offering to investors that indicate the investment required, expected ROI, deal structure, marketing plan, operations plan, and management team description. Potential exit or company sustainability strategies also must be included.

Business Plan Presentation: Strong written and oral skills greatly facilitate success in the business world. Those individuals that can effectively communicate their ideas will have an advantage over those that cannot.

( Will be Project type is Beauty Salon ). Use an assumption list the statements

greenmouse873

(130 Points)

Q1. A friend of mine is graduating soon. She accepted a job offer where she will be living away

from her family for the next couple of years. She is in the market looking for a new car and she

needs your help in order to decide whether to buy or lease. Since she does not know yet if she is

going to stay in the new job or not, she wants a short term commitment, two to three years.

She is currently looking at the 2018 Toyota Corolla. Based on the following information and the

fact that her opportunity cost is 6%, your recommendation to buy or lease is needed if the decision

is over two or three years. A detailed and complete analysis is required to support your claims.

New 2018 Corolla LE Lease â

$179 per Month / 36 Months / $2,878 Due at Signing

OFFER DETAILS

For well-qualified lessees with approved credit through Southeast Toyota Finance. Not all

lessees will qualify for this payment amount. Closed-end lease on new 2018 Corolla LE model #

1852 with automatic transmission and select equipment. Adding options increases payment.

$179.00 per month for 36 months. $2,878 due at signing includes $2,699 down payment and first

month's payment. No security deposit required. $17,582 Adjusted Capitalized Cost is based on

down payment; excludes tax, tag, registration, title and dealer fees. Dealer fees vary by dealer.

Monthly payments do not include applicable taxes. Lessee pays the remainder of maintenance

after ToyotaCare expires, excess wear and use, and $0.18 per mile over 12,000 miles per year.

Lease payments total $6,444. Disposition Fee of $350 due at lease-end. May not be combined

with certain other offers. Must take delivery between 06/05/18 and 07/09/18.

Assume that the same offer details above apply for 36 month lease and the mileage limit is 36,000

miles, but she wonât go above the mileage limit.

The MSRP for New 2018 Corolla LE is $20,897 (do not worry about taxes). She applied for an

auto loan and was able to get 1.99% APR compounded monthly for 24 or 36 months. Auto loan

payments are due the end of the month, while lease payments are due the first day of each month.

No down payment required to purchase the car.

COST TO OWN A 2018 TOYOTA COROLLA State:

Miles Driven Annually: 12,000

Cost to Own Breakdown Year by

Year: Year 1 Year 2 Year 3 Year 4 Year 5 Total

Depreciation $4,675 $1,235 $1,164 $1,038 $889 $9,002

Maintenance $0 $0 $135 $111 $812 $1,057

Repairs $0 $0 $0 $706 $918 $1,625

Every new vehicle purchased or leased includes complementary maintenance and roadside

assistance for 2 years or 25,000 miles.

Based on the KBB, the following will be the fair value of the car for different parties in 24-month

and 36-month.

In 24-Month In 36-Month

Retail Value $15,518 $14,967

Trade-In $12,418 $11,967

Private Value $13,518 $13,017

Note: The dealership will sell you a used car at the Retail Value, but buy it from you at the Trade-

In value. If you decided to sell your car by yourself to a private party, you will receive the private

value.

Hint: The main goal of this project is to see whether you understand the concept of Time Value of

Money (TVM), we covered in Chapter 4. TVM is the most important principle in the world of

finance, and I have to make sure you understand that money has different values over time

depending on the required interest rate. In other words, it is not simply adding or subtracting

numbers (a dollar today is not equivalent to a dollar tomorrow). Therefore, you need to create a

time line for each option, buy vs. lease, and for each period, 24 vs. 36 mo. On this time line, you

have to include all projected monthly payments based on the provided information. Once you have

all the payments on your time line, you can now discount them (calculate the present value) back

to period t=0 and compare your options. Feel free to use spreadsheets if you like to do it this way.

Finally, before you email or call me with your questions, you need to review Ch. 4 carefully. I may

give hints, but I will NOT solve the project for you!

- A detailed and complete analysis for the problem is required. Excel spreadsheets,

ACC 100 Lecture Notes - Lecture 12: Car Dealership, Retained Earnings, Income Statement

Document Summary

Get access

Related Documents

ACC 100 Study Guide - Final Guide: Deferral, Gross Profit, Accounts Payable

ACC 100 Lecture Notes - Lecture 6: Office Supplies, Cash Flow, Savings Account

ACC 100 Study Guide - Midterm Guide: Inventory Control, Accounting Equation, Retained Earnings

Related Questions