Catur Federal Savings and Loan—Lease Options

7 Pages Posted: 9 Jun 2009

See all articles by Mark E. Haskins

Mark E. Haskins

University of Virginia - Darden School of Business

Rebecca Bray

affiliation not provided to SSRN

Abstract

Students analyze three lease options available to the company and determine the effects of each on cash flow, income tax expense, the balance sheet, and the income statement effects.

Excerpt

UVA-C-1043

CATUR FEDERAL SAVINGS AND LOAN—LEASE OPTIONS

In July, 1985, Mr. Clyde Stew, Vice President of Catur Federal Savings and Loan Association, was evaluating three lease options proposed by Domin Leasing Corporation for a Burroughs Model B4925 computer system. Mr. Stew, who had received an MBA two years earlier from a major Eastern business school, recalled that the accounting profession had certain guidelines for classifying leases and reporting lease information in financial statements. As he reviewed the letter he had just received from David Wrig of Domin Leasing (see Exhibit 1), he wondered what affect this would have on his leasing decision.

Company Background

Catur Federal Savings and Loan had been founded in 1927 as a federally chartered mutual savings and loan association operating in the metropolitan Miami area, and had since expanded to 27 other full service offices located throughout the state of Florida. As a thrift institution, Catur Federal accepts savings and checking deposits and invests with the major part of its assets in residential mortgages. It also offers commercial, consumer, educational and other types of loans. Until 1981, when deregulation occurred in the banking industry, Catur Federal had never experienced an unprofitable year. However, as shown in Exhibit 2, the company suffered losses during 1981‑83 and managed only a slight profit in 1984. As a result of these accumulated losses, the President of Catur Federal had asked Mr. Stew to lease, rather than purchase, any equipment needed during 1985.

Decision Issues

. . .

Keywords: balance sheet, accounting, financial accounting, balance sheet, ncome statement, accounting, leasing, liabilities

Suggested Citation

Haskins, Mark E. and Bray, Rebecca, Catur Federal Savings and Loan—Lease Options. Darden Case No. UVA-C-1043, Available at SSRN: https://ssrn.com/abstract=1416569

Mark E. Haskins (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924 -4826 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/haskins.htm

Rebecca Bray

affiliation not provided to SSRN

No Address Available

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