[Janine44]

Crumple Car Rentals is planning to expand into the Us and needs to acquire approximately 400 additional automobiles for rental purposes. Because Crumples cash reserves were substantially depleted they have the following options: issue additional debt, Create a wholly owned leasing subsidiary that would borrow the money with a guarantee for repayment form Crumple. Create a trust that would borrow the money with a guarantee for repayment form Crumple and lease the cars to it. In the event of liquidation the residual value of the trust would go to the Historical society. Compare and contrast the three alternatives from the perspective of the impact on Crumples consolidated balance sheet, the legal ramifications, the ability to maintenance , repair and replacement of automobiles. Select preferred alternative and show why it is the best choice.

Answer I came up with: Best choice would be to create a wholly owned leasing subsidiary as long as you do the equity method of accounting there is no legal ramifications. You would have the control over the maintenance, repair and replacement of the automobiles.