The Bear Minimum Analysis

Big Bear Power is a public utility company that has posted strong financial results for several years. Big Bear has positive cash flow, and it is in compliance with all its debt covenants. Big Bear leases a combustion turbine from Goliath Co for a 10-year non-cancelable term. The lease agreement is signed on December 15, 2004 and Big Bear’s right to use the turbine begins on January 1, 2005. Various provisions and other facts from the lease are listed below.
Big Bear pays Stipe, Berry, Mills and Buck LLP, its external legal counsel, $500K in connection with negotiating the lease agreement. Big Bear is also required to pay $1 million of legal fees incurred by Goliath Co. Provision 2 The stated default provisions in the lease include a provision that requires a penalty payment if Big Bear’s bank declares a default under its primary credit arrangement. Big Bear will be in default under the credit arrangement if there is a “material adverse change” in its financial condition. Material adverse change” is not defined in the loan documents. The Company believes the likelihood of default is remote. The bank has no relationships with Goliath Co. (Note: This is a customary provision in leasing arrangements. ) Provision 3 The lease agreement stipulates that Big Bear’s annual lease payments shall be $1 million per year, payable ratably over 12 months at the beginning of each month.
For each calendar year of the term of the lease after 2005, Big Bear will pay minimum rent in an amount equal to $1 million increased (but not decreased) by the same percentage as the increase in the Consumer Price Index (CPI) from January 1 of the prior year until January 1 of each respective year. The most recent annual increase in CPI as of the inception of the lease was 4%. Required: • For each provision presented, evaluate whether the costs or potential costs associated with the provision should be included in “minimum lease payments,” as defined in FASB Statement No. 13, Accounting for Leases.

Don't use plagiarized sources. Get Your Custom Essay on
The Bear Minimum Analysis
Just from $13/Page
Order Essay
Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Order your essay today and save 25% with the discount code: THANKYOUPlace Order
+
Live Chat+1(978) 822-0999EmailWhatsApp