'Octane Service Station Essay\r'

'On March 15, Julio Trevino signed a learn pact to operate a accelerator function situation that was owned by the Octane Oil Company (here after, manifestly â€Å"Octane”). Trevino had contacted the regional gross revenue coach-and-four of Octane in response to an advertisement that solicited applicants â€Å"with $25,000 to invest” to lease and operate a newly erected Octane gasoline receipts broadcast. Trevino had been able-bodied to cumulate approximately $32,000 for investment purposes as a gist of a $25,000 inheritance and savings on the salary of $865 per week he earned as omnibus of a military service berth operated as a divert department of a J.C. Penney store. Most of this $32,000 was held in political sympathies bonds.\r\nThe regional sales manager for Octane was affect with Trevino’s personal and financial qualifications, and after some(prenominal) interviews, a lease agreement was signed. During one of these meetings the sales mana ger informed Trevino that the new institutionalize would be ready for occupancy on May maiden at a total investment personify of $300,000. Of this amount, $100,000 had already been give for land, and a total of $cc,000 would be spent for a building that would be â€Å" steady-going for most 40 social classs”. In discussing expediency potential, the sales manager pointed unwrap that Octane’s field advertising program and the consumer appeal generated by the entrancing station â€Å"will be worth at least $30,000 a year to you in consumer goodwill.”\r\nThe lease agreement stipulated that Trevino pay a rental of $1,250 per month for the station summing up $0.04 for each gallon of gasoline delivered t the station by Octane1. A separate agreement was also signed whereby Octane agreed to look at and Trevino agreed to buy a original marginal quantities of gasoline and separate automotive products for the service station operation.\r\nAs both evidence of good trustingness and as a predefrayment on certain obligations that he would shortly incur to Octane, Trevino was required to file $20,000 with Octane at the time the lease was signed. Trevino raised the bullion for this deposit by liquidating government bonds. Octane use most of this capital to defray certain obligations incurred by Trevino to the oil bon ton prior to the opening of the new station. The deductions from the $20,000 deposits were applied as follow:\r\n1 The lease, which covered a occlusion of one year beginning May 1, was automati addressy renewable unless notice of cancellation was given by every party at lease 30 eld prior to an anniversary date. The regional sales manager of the Octane Oil Company estimated that approximately 150,000 gallons of gasoline would be delivered to Trevino’s Service Station during the first 12 months of operations. Subsequently, Trevino’s get downs revealed that 27,000 gallons (including the initial parentage) were actually delivered during the first twain months of operation.\r\nThe equipment, including floor and hydraulic jacks, a battery charger, foreword sets, and oil and grease guns, became Trevino’s property. A exemplification of the oil company stated that this equipment would last about five years. The un paying(a), non-interest bearing balance of $10,300 Trevino owed Octane for equipment was to be paid in five semi-annual installments of $2,060 each. The first such payment was due November 1. The $2,755 remaining from the $20,000 originally depo placed with Octane was returned to Trevino on April 30. He deposited this money in a special checking vizor he had set up for his service station venture.\r\nJust before opening for calling on May 1, Trevino converted some additional government bonds into $7,000 immediate payment which he also placed in the service station account. Prior to May 1, he wrote the avocation checks: $1,650 for office furniture that had an expecte d spiritedness of 10 years, and $900 for a fire and casualty amends policy providing coverage for a one year issue beginning May 1. On April 30, Trevino transferred $ two hundred from the service station checking account to the interchange draftsman at the service station. It was Trevino’s intention to deposit in the bank all s machinece $200 of the cash on hand at the finish of each business day. The balance in the service station checking account at the start of business was, therefore, $7,005. In addition, Trevino had $2,700 in a savings account.\r\nOn May 1, the service station was opened for business. In his effort to build up clientele, Trevino worked approximately 60 hours per week compared with 40 in his previous job. In addition, three other people were employed on either a full or half-time basis. Trevino was reasonably satisfied with the patronage he was able to build up during the first two months the station was open. At the end of June, however, he felt i t would be desirable to take a more cautious look at how he was making out in his new business venture. Trevino felt that he should record his progress and present position in a form that would be useful not only at the present time but also for comparative purposes in the future, perhaps a six months intervals ending on June 30 and celestial latitude 31.\r\nTrevino maintained a simple record safekeeping system in which cash receipts and cash payments were itemized daily in a loose-leaf notebook. Separate pages were speechless for specific items in this notebook. During the months of May and June, the following cash receipts and payments had been recorded:\r\nThe $500 listed in cash receipts as rental from parking neighborhood had been receive from an adjacent business establishment that used one portion of the service station site as a parking space for certain of its employees. The rental received covered a period extending from May 15 to July 15.\r\nIn addition to the record o f cash receipts and payments, a detailed leaning was kept of the amounts of money that were due from, or owed to, other individuals or companies. An analysis of these records revealed that $143 was due the business for gas, oil, and car servicing from a wealthy widow ally of the Trevino family who preferred to deal on a course credit basis. Also, on the evening of June 30, one of the employees completed wax a car for a regular guest who was out of town and would be unable to call for his car until July 3. Trevino had quoted a price of $56 for this job.\r\nTrevino recalled that when he once worked at an automobile agency, he had hear that setting up a reserve for hazardous debts equal to two percent of all gravid accounts was a good idea. Trevino had also jotted down the circumstance that he and his family had used gas and oil from the service station worth $101 at retail prices, for which no payment had been made. Approximately $79 had been paid to Octane Oil Company for this merchandise.\r\nA further abridgment of his records revealed the following unpaid bills resulting from operations in June:\r\nThe service station’s employees had last been paid on Saturday, June 28, for services rendered through Saturday evening. Wages earned on June 29 and 30 would amount to $232 in the following Saturday’s payroll.\r\nTrevino took a physical inventory on the evening of June 20, and he found gasoline, motor oil, grease, tires, batteries, and accessories on hand that had cost $10,018. While Trevino was figuring his inventory position, he compared his recorded gallonage sales of gasoline on hand at the end of the period against the passel of gasoline at the beginning inventory plus deliveries. In this manner, Trevino ascertained that shrinkage due to evaporation, temperature changes, bumble and other causes amounted to 302 gallons of gasoline that he estimated had cost $360.\r\n deeply in June, Trevino’s married son agnise that he would be un able, because of prolonged illness to keep back payment of $192 for interest expense and $800 for principal quittance on a $2,400 bank loan. Trevino, who had acted as co-signer on the note, would be obligated to meet this payment on July 1.\r\n'