Differential Analysis for a Lease or Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $282,700 (original cost of $400,800 less accumulated depreciation of $118,100) for $277,200, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $285,200 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,900. a. Prepare a differential analysis, dated May 25, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs Income (Loss) $ $ $ b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The net from selling is $ .
Differential Analysis for a Lease or Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $282,700 (original cost of $400,800 less accumulated depreciation of $118,100) for $277,200, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $285,200 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,900. a. Prepare a differential analysis, dated May 25, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs Income (Loss) $ $ $ b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The net from selling is $ .
Related questions
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
|
Kincaid Company owns equipment with a cost of $367,700 andaccumulated depreciation of $56,200 that can be sold for $274,600,less a 3% sales commission. Alternatively, Kincaid Company canlease the equipment for three years for a total of $285,700, at theend of which there is no residual value. In addition, the repair,insurance, and property tax expense that would be incurred byKincaid Company on the equipment would total $15,300 over the threeyear lease.
a. Prepare a differential analysis on February18, as to whether Kincaid Company should lease (Alternative 1) orsell (Alternative 2) the equipment. For those boxes in which youmust enter subtracted or negative numbers use a minus sign.
| Differential Analysis | |||
| Lease(Alt. 1) or Sell (Alt. 2) Equipment | |||
| February 18 | |||
| Lease Equipment (Alternative 1) | Sell Equipment (Alternative 2) | Differential Effect on Income (Alternative2) | |
| Revenues | $ | $ | $ |
| Costs | |||
| Income (Loss) | $ | $ | $ |
b. Should Kincaid Company lease (Alternative 1)or sell (Alternative 2) the machine?
