Astro Company owns equipment with a cost of $367,300 and accumulated depreciation of $56,100 that can be sold for $273,800, less a 3% sales commission. Alternatively, Astro Company can lease the equipment for 3 years for a total of $285,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $15,000 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) October 29 Lease Sell Line Item Description Equipment Equipment Revenues Costs Profit (Loss) 4000 (Alternative 1) (Alternative 2) (Alternative 2) 245,800✔ -12.000 ✓ Differential Effects 273,800✔

Astro Company owns equipment with a cost of $367,300 and accumulated depreciation of $56,100 that can be sold for $273,800, less a 3% sales commission. Alternatively, Astro Company can lease the equipment for 3 years for a total of $285,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $15,000 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) October 29 Lease Sell Line Item Description Equipment Equipment Revenues Costs Profit (Loss) 4000 (Alternative 1) (Alternative 2) (Alternative 2) 245,800✔ -12.000 ✓ Differential Effects 273,800✔

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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