Assume that Green Co. is considering disposing of equipment that cost $90,000.00 and has $62,500.00 of accumulated depreciation to date. Green Co. can sell the equipment through a broker for $35,000.00 less 4% commission. Alternatively, Red Co. has offered to lease the equipment for four years for a total of $52,000.00. Green Co. will incur repair, insurance, and property tax expenses estimated at $10,000.00. At lease end, the equipment is expected to have no residual value. Determine the net differential income from the lease alternative.

Assume that Green Co. is considering disposing of equipment that cost $90,000.00 and has $62,500.00 of accumulated depreciation to date. Green Co. can sell the equipment through a broker for $35,000.00 less 4% commission. Alternatively, Red Co. has offered to lease the equipment for four years for a total of $52,000.00. Green Co. will incur repair, insurance, and property tax expenses estimated at $10,000.00. At lease end, the equipment is expected to have no residual value. Determine the net differential income from the lease alternative.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 1BE: Lease or sell Plymouth Company owns equipment with a cost of 600,000 and accumulated depreciation of...

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