Differential AnalysisOperate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2)July 1OperateInvest inDifferentialWarehouseBondsEffects(Alternative 1) (Alternative 2) (Alternative 2)RevenuesCosts:Costs to operate warehouseCost of equipment less residual valueProfit (Loss) Differential Analysis Involving Opportunity CostsOn July 1, Matrix Stores Inc. is considering leasing a building and buying the necessary equipment to operate a public warehouse.Alternatively, the company could use the funds to invest in $149,800 of 6% U.S. Treasury bonds that mature in 16 years. The bondscould be purchased at face value. The following data have been assembled:Cost of store equipment$149,800Life of store equipment16 yearsEstimated residual value of store equipment$17,600Yearly costs to operate the warehouse, excludingdepreciation of equipment$56,100Yearly expected revenues-years 1-876,000Yearly expected revenues-years 9-1670,400Required:1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) ascompared with investing in U.S. Treasury bonds (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicatea loss.

Differential analysis is made by the company when the company is having two or more than two…

1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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