Eclipse Construction Company is considering selling excessmachinery with a book value of $360,800 (original cost of $484,900less accumulated depreciation of $124,100) for $224,800, less a 6%brokerage commission. Alternatively, the machinery can be leasedfor a total of $220,090 for five years, after which it is expectedto have no residual value. During the period of the lease, EclipseConstruction Companyâs costs of repairs, insurance, and propertytax expenses are expected to be $16,678.
Required: A. Prepare a differentialanalysis, dated April 16 to determine whether Eclipse should lease(Alternative 1) or sell (Alternative 2) the machinery. Refer to theAmount Descriptions list provided for the exact wording of theanswer choices for text entries. For those boxes in which you mustenter subtracted or negative numbers use a minus sign. If there isno amount or an amount is zero, enter â0â. A colon (:) willautomatically appear if required. B. On the basis of the data presented, would it be advisable tolease or sell the machinery? Explain.
Amount Descriptions
Costsâ
Revenues
A. Prepare a differential analysis, dated April 16 to determinewhether Eclipse should lease (Alternative 1) or sell (Alternative2) the machinery. Refer to the Amount Descriptions list providedfor the exact wording of the answer choices for text entries. Forthose boxes in which you must enter subtracted or negative numbersuse a minus sign. If there is no amount or an amount is zero, enterâ0â. A colon (:) will automatically appear if required.
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Differential Analysis
Lease Machinery (Alternative 1) or Sell Machinery (Alternative2)
April 16
1
Lease Machinery
Sell Machinery
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
4
5
Eclipse Construction Company is considering selling excessmachinery with a book value of $360,800 (original cost of $484,900less accumulated depreciation of $124,100) for $224,800, less a 6%brokerage commission. Alternatively, the machinery can be leasedfor a total of $220,090 for five years, after which it is expectedto have no residual value. During the period of the lease, EclipseConstruction Companyâs costs of repairs, insurance, and propertytax expenses are expected to be $16,678.
Required: | ||||||||||||||||||||||||||||||
A. | Prepare a differentialanalysis, dated April 16 to determine whether Eclipse should lease(Alternative 1) or sell (Alternative 2) the machinery. Refer to theAmount Descriptions list provided for the exact wording of theanswer choices for text entries. For those boxes in which you mustenter subtracted or negative numbers use a minus sign. If there isno amount or an amount is zero, enter â0â. A colon (:) willautomatically appear if required. | |||||||||||||||||||||||||||||
B. | On the basis of the data presented, would it be advisable tolease or sell the machinery? Explain. Amount Descriptions Costsâ
|