Which of thefollowing actions constitutes acceptance of an offer?
Multiple Choice
Offeree made material alterations to the terms of the offer
Offeree intended to enter the contract only if requisite changeswere made
Offeree reflected assent to the terms of the offer in therequisite manner
Offeree suggested addition of new terms that were earlier notaddressed in the offer
Which of thefollowing actions constitutes acceptance of an offer?
Multiple Choice
Offeree made material alterations to the terms of the offer
Offeree intended to enter the contract only if requisite changeswere made
Offeree reflected assent to the terms of the offer in therequisite manner
Offeree suggested addition of new terms that were earlier notaddressed in the offer
Related questions
Cashmere Limited is considering whether to set up a division in order to manufacture a new product, the Ness. A feasibility study recently undertaken (but not yet paid for) at a cost of K85,000 has suggested that the Ness should be sold for K35 at which price sales would be approximately 10,000 for each of the next eight years.
However, after the preparation of the following statement showing the new division would make an annual loss, the directors have decided not to go ahead with the production of the Ness.
| DETAILS | $ | $ |
| ANNUAL INCOME | 350,000 | |
| EXPENSES | ||
| WAGES | 135,000 | |
| SALARIES | 12,000 | |
| MATERIALS | 70,000 | |
| VARIABLE OVERHEADS | 43,000 | |
| RENT | 12,000 | |
| DEPRECIATION | 50,000 | |
| HEAD OFFICE CHARGE | 30,000 | 352,000 |
| LOSS | (2,000) |
Notes
1. The wages figure represents three hours per unit at K4.50 per hour.
2. The salaries figure is made up of a managerâs salary of K7,000 p.a. and a supervisorâs salary of K5,000. Both are currently employed by Cashmere Limited. If the Ness is not produced the manager will still remain in employment but the supervisor will be âpersuadedâ to take early retirement at a pension of K2,000 p.a.
3. Each Ness needs 2 kg of material costing K3.50 per kg.
4. Variable overheads will be K4.30 per unit.
5. The new division will occupy a factory rented especially for the purpose at an annual rental of K12,000
6. Manufacture of the Ness would require a machine costing K400,000 with no scrap value at the end of eight years. Cashmere charge depreciation on a straight line basis.
7. Cashmere allocates its fixed costs at the rate of K1 per direct labor hour. Total head office costs would increase by K5,000 p.a. if the new division were set up.
The total cost of capital of Cashmere is estimated at 6% p.a. in real terms.
You are required:
(a) Prepare calculations to show whether the directors have made the right decision.
(b) Explain the assumptions underlying the calculations you have performed in part (a) and the reasons for your treatment of the various costs maintained.
(c) Produce a statement showing sensitive your decision is to the estimates of:
(i) Annual sales volume;
(ii) Direct labor costs; and
(iii) Product life.
Kola Corporation (âKolaâ) leases quality weapons to customers. She gains a loyal following of customers because quality is of limited supply but high demand due to its usefulness for the upcoming winter. Further, Kola tends to offer more favorable financing terms than competitors offering substitutive products (e.g., Walnut, LLC).
Kola was recently approached by the Noodle, Inc. (Noodle) which is interested in leasing a substantial stock of weapons over a potentially lengthy period of time. Noodle has indicated a willingness to pay any rate that Kola Corporation demands for its quality products, but generally receives an interest rate of 12% on all other borrowing transactions. Noodleâs management are a very noble group, so payments are reasonably assured. Further, there are no material cost uncertainties.
Kola has gathered its council to discuss entering into such a contract with Noodle and has invited you to provide financial council. Kolaâs board has proposed several alternative sets of lease terms (below) and would like you determine what Noodleâs annual payments will be under each scenario, if payments are made at the beginning of the period.
| A | B | C | D | |
| Fair value of weapons to be leased | $365,760 | $365,760 | $365,760 | $365,760 |
| Book value of weapons to be leased | $365,760 | $290,760 | $365,760 | $365,760 |
| Desired Profit on Lease Initiation | $0 | $75,000 | $0 | $0 |
| Lease Term | 11 years | 11 years | 6 years | 6 years |
| Useful Life of leased assets | 13 years | 13 years | 6 years | 6 years |
| Desired rate of return | 10% | 10% | 10% | 13.225% |
| Residual Value (guaranteed) | $24,350 | $24,350 | $25,000 | $75,000 |
REQUIRED:
Prepare a schedule for Kola which uses Excel to compute Noodleâs necessary annual payment under each of the scenarios listed in the chart above. The schedule should list for each scenario above the desired present value of lease payments, future value of the leased asset, the lease term, and the interest rate and utilize an Excel formula to compute a payment. Kola is a high paying client of your firm, so the schedule should be extremely organized and professional looking (e,g., include a title, date, description in the top left-hand corner and utilize borders, font effects, etc. in cells to make the worksheet look visually appealing).
(Note: You must use only Excel to prepare and present all parts of this table. Do not use a hand-held calculator, and do not use the compound interest tables to solve any part of this problem. Points will be deducted if Excel formulas are not used for each necessary computation.)
Prepare a worksheet that determines the type of lease for each party to the transaction. The purpose of this worksheet is to automate the determination of lease type. This worksheet should show:
The particulars for each lease scenario.
List each capital lease requirement and indicate whether or not it is met
Use Excel formulas where meeting a particular criteria requires a calculation or is contingent on one of the lease criteria (e.g., âifâ statements). The only items that should be hard-keyed in here are the particulars for the lease scenario and the answers to the first two capital lease criteria (ownership transfer, and bargain purchase option) for the lessee/lessor and the answers to the two lessor-only capital lease criteria.
For the requirements below, assume Kola Corporation chooses lease option A and enters into an agreement with Noodle on 1/1/18. Noodle should return the weapons on 12/31/2028.
Prepare a lease amortization schedule describing the pattern of payments and interest over the lease term for both Kola and Noodle.
(Note: You must use only Excel to prepare and present all parts of this table. Do not use a hand-held calculator, and do not use the compound interest tables to solve any part of this problem.)
Prepare the appropriate entries for both Kola and Noodle on 1/1/18. Numbers in journal entries should be linked to the table prepared in number 3 above or computed using Excel formulas.
Prepare the appropriate entries for both Kola and Noodle through 1/1/21. Numbers in journal entries should be linked to the table prepared in number 3 above or computed using Excel formulas.
Prepare the appropriate entries for both Kola and Noodle on 12/31/2028. Assume the weapons returned to Kola have a residual value of $500.
