Casper Company owns equipment with a cost of $366,800 and accumulated depreciation of $54,900 that can be sold for $277,500, less a 5% sales commission. Alternatively, Casper Company can lease the equipment for three years for a total of $288,100, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Casper Company on the equipment would total $15,800 over the three year lease. a. Prepare a differential analysis on February 18, as to whether Casper Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Equipment February 18   Lease Equipment (Alternative 1) Sell Equipment (Alternative 2) Differential Effect on Income (Alternative 2) Revenues       Costs       Income (Loss)       b. Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Lease or Sell

Casper Company owns equipment with a cost of $366,800 and accumulated depreciation of $54,900 that can be sold for $277,500, less a 5% sales commission. Alternatively, Casper Company can lease the equipment for three years for a total of $288,100, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Casper Company on the equipment would total $15,800 over the three year lease.

a. Prepare a differential analysis on February 18, as to whether Casper Company should lease (Alternative 1) or sell (Alternative 2) the equipment.

Differential Analysis
Lease (Alt. 1) or Sell (Alt. 2) Equipment
February 18
  Lease Equipment
(Alternative 1)
Sell Equipment
(Alternative 2)
Differential Effect
on Income
(Alternative 2)
Revenues      
Costs      
Income (Loss)      

b. Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?
 

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