Up-to-Date Issues and Questions of Octane Rent

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On March 15 Julio Trevino signed a rental understanding to run a gasoline service station that was owned by the Octane Oil Company (here after merely “Octane”). Supermex had contacted the regional gross revenues director of Octane in response to an advertisement that solicited appliers “with $ 25. 000 to invest” to rent and run a freshly erected Octane gasolene service station.

Supermex had been able to roll up about $ 32. 000 for investing intents as a consequence of a $ 25. 000 heritage and nest eggs on the wage of $ 865 per hebdomad he earned as director of a service station operated as a separate section of a J. C. Penney shop. Most of this $ 32. 000 was held in the authority’s bonds.

Octane Rent

The regional gross revenue director for Octane was impressed with Trevino’s personal and fiscal makings and after several interviews a lease understanding was signed.

During one of these meetings the gross revenue director informed Trevino that the new station would be ready for tenancy on May 1st at an entire investment cost of $ 300. 000. Of this sum $ 100. 000 had already been paid for their land and a sum of $ 200. 000 would be spent for an edifice that would be “good for approximately 40 years”. In discoursing net income potency the gross revenue director pointed out that Octane’s national advertisement plan and the consumer entreaty generated by the attractive station “will be deserving at least $ 30.

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000 a twelvemonth to you in consumer good will. ”

The rental understanding stipulated that Trevino pays a lease of $ 1. 250 per month for the station plus $ 0. 04 for each gallon of gasoline delivered to the station by Octane1. A separate understanding was signed whereby Octane agreed to sell and Trevino agreed to purchase a certain minimal measure of gasolene and other automotive merchandise for the service station operation.

As both grounds of good religion and as a prepayment of certain duties that he would shortly incur to Octane. Trevino was required to lodge $ 20. 000 with Octane in the clip the rental was signed. Trevino raised the hard currency for this sedimentation by neutralizing authoritiy bonds. Octane used most of this money to defray certain duties incurred by Trevino to the oil company prior to the gap of the new station. The tax write-offs from the $ 20. 000 sedimentations were applied as follows.

The rental which covered a period of one twelvemonth beginning May 1 was automatically renewable unless notice of cancellation was given by either party at lease 30 years prior to an anniversary day of the month. The regional gross revenues director of the Octane Oil Company estimated that about 150. 000 gallons of gasoline would be delivered to Trevino’s Service Station during the first 12 months of operations. Subsequently. Trevino’s records revealed that 27. 000 gallons (including the initial stock list) were really delivered during the first two months of operation.

The equipment including floor and hydraulic knuckleboness a battery courser tune-up sets and oil and lubricating oil guns became Trevino’s belongings. A representative of the oil company stated that this equipment would last about five old ages. The unpaid non-interest bearing balance of $ 10. 300 Supermex 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 staying from the $ 20. 000 originally deposited with Octane was returned to Trevino on April 30. He deposited this money in a particular checking history, he had set up for his service station venture.

Merely before opening for concern on May 1 Trevino converted some extra authority’s bonds into $ 7. 000 hard currency, which he besides placed in the service station history. Prior to May 1 he wrote the undermentioned checks: $ 1. 650 office furniture that had an expected life of 10 old ages and $ 900 for a fire and casualty insurance policy supplying coverage for a one twelve month period beginning May 1. On April 30 Supermex transferred $ 200 from the service station look intoing history to the hard currency drawer at the service station. It was Trevino’s purpose to lodge in the bank all but $ 200 of the hard currency on menus at the stopping point of each concern twenty-four hours. The balance in the service station looks intoing history at the start of concern was hence. $ 7. 005. In add-on. Trevino had $ 2. 700 in a savings history.

On May 1 the service station was opened for concern. In his attempt to construct up patronages. Trevino worked about 60 hours per hebdomad compared with 40 in his old occupation. With add-on three other people were employed on either a full or part time footing. Trevino was moderately satisfied with the backing he was able to construct up during the first two months the station was unfastened. In the terminal of June nevertheless he felt it would be desirable to take a more careful expression of how he was doing out in his new concern venture. Trevino felt that he should enter his advancement and present place in a signifier that would be until non merely at the present clip, but besides for comparative intents in the hereafter possibly a six month intervals stoping on June 30 and December 31.

Supermex maintained a simple record, maintaining system in which hard currency, gross and hard currency payments was itemized daily in a loose-leaf notebook. Separate pages were reserved for specific points in this notebook. During the months of May and June the undermentioned hard currency, gross and payments had been recorded.

The $ 500 listed in hard currency grows as a rental from parking country had been received from an next concern constitution that used one part of the service station site as a parking infinite for certain of its employees. The rents received covered a period widening from May 15 to July 15.

In add-on to the record of hard currency, gross and payments an elaborate listing was kept of the sums of money that were due from or owed to other persons or companies. An analysis of these records revealed that $ 143 was due the concern for gas, oil and auto service from an affluent widow friend of the Trevino household who preferred to cover on a recognition footing. Besides on the eventide of June 30 one of the employees completed waxing a auto for a regular client who was out of town and would be unable to name for his auto until July 3. Supermex had quoted a monetary value of $ 56 for this occupation.

Supermex recalled that when he one time worked at a car bureau, he had heard that putting up a modesty for bad debts equal to two per centum of all outstanding histories was a good thought. Supermex had jotted down the fact that he and his household had used gas and oil from the service station worth $ 101 at retail monetary values for which no payment had been made. Approximately $ 79 had been paid to the Octane Oil Company for this ware.

A further sum-up of his records revealed the undermentioned unpaid measures ensuing from operations in June. The service station’s employees had last been paid on Saturday. June 28 for services rendered through Saturday eventide. Wages earned on June 29 and 30 would amount to $ 232 in the undermentioned Saturday’s passed.

Trevino took a physical stock list on the eventide of June 20 and he found gasoline motor oil lubricating oil, tires, batteries and accoutrements on menus that had cost $ 10. 018. While Trevino was calculating his stock list place he compared his recorded gallonage gross revenues of gasolene on menus at the terminal of the period against the volume of gasolene at the get downing stock list plus bringings. In this mode. Supermex ascertained that shrinking due to vaporization temperature alterations waste and other causes amounted to 302 gallons of gasoline that he estimated had cost $ 360.

Late in June Trevino’s married boy realized that he would be unable because of a drawn-out unwellness to make payment of $ 192 for involvement disbursal and $ 800 for chief refund on a $ 2. 400 bank loan. Trevino, who had acted as co-signer of the note would be obligated to run into this payment on July 1.