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Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $277,500 (original cost of $399,000 less accumulated depreciation of $121,500) for $277,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $287,300 for five years, after which it is expected t have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,800. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Revenues Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Costs Profit (Loss) Sell Differential Effects Machinery (Alternative 1) (Alternative 2) (Alternative 2) Lease Machinery

Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $277,500 (original cost of $399,000 less accumulated depreciation of $121,500) for $277,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $287,300 for five years, after which it is expected t have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,800. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Revenues Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Costs Profit (Loss) Sell Differential Effects Machinery (Alternative 1) (Alternative 2) (Alternative 2) Lease Machinery

FINANCIAL ACCOUNTING
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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Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $277,500 (original cost of $399,000 less accumulated depreciation of $121,500) for $277,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $287,300 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,800. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Revenues Costs Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Profit (Loss) Lease Sell Differential Effects Machinery Machinery (Alternative 1) (Alternative 2) (Alternative 2) b. On the basis of the data presented, would it be advisable to lease or sell the machinery?
Transcribed Image Text:Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $277,500 (original cost of $399,000 less accumulated depreciation of $121,500) for $277,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $287,300 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,800. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Revenues Costs Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Profit (Loss) Lease Sell Differential Effects Machinery Machinery (Alternative 1) (Alternative 2) (Alternative 2) b. On the basis of the data presented, would it be advisable to lease or sell the machinery?
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