Differential Analysis for a Lease or Sell DecisionBurlington Construction Company is considering sellingexcess machinery with a book value of $282,000(original cost of $400,500 less accumulated depreciationof $118,500) for $276,600, less a 5% brokeragecommission. Alternatively, the machinery can be leasedfor a total of $286,200 for five years, after which it isexpected to have no residual value. During the period ofthe lease, Burlington Construction Company's costs ofrepairs, insurance, and property tax expenses areexpected to be $26,000.a. Prepare a differential analysis dated January 15 todetermine whether Burlington Construction Companyshould lease (Alternative 1) or sell (Alternative 2) themachinery. If required, use a minus sign to indicate aloss.Differential AnalysisLease (Alt. 1) or Sell (Alt. 2) MachineryJanuary 15RevenuesCostsProfit (Loss)LeaseSellDifferentialMachineryMachineryEffects(Alternative 1) (Alternative 2) (Alternative 2)$b. On the basis of the data presented, would it beadvisable to lease or sell the machinery?

a. Differential analysis Lease Machinery (a) Sell Machinery (b) Differential Effect on Income (a - b) Revenues $286,200 $276,600 $9,600 Costs $26,000 $13,830* $12,170 Income (Loss) $260,200 $262,770 ($2,570) *$276,000 x 5% = $13,830b. It would be advisable to sell the machinery because the net income is higher in the selling option.

Business

Accounting

Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $282,000 (original cost of $400,500 less accumulated depreciation of $118,500) for $276,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $286,200 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 $26,000.

Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $282,000 (original cost of $400,500 less accumulated depreciation of $118,500) for $276,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $286,200 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 $26,000.

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 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...

See similar textbooks

Similar questions

Need help
Give answer please
PROVIDE Answer with calculation and explanation
Answer
Please solve the problem
1.)
1. Differential Analysis for a Lease-or-Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $279,300 (original cost of $399,200 less accumulated depreciation of $119,900) for $276,600, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $283,600 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,100. 2. Differential Analysis for a Discontinued Product A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year: Sales $234,500 Cost of goods sold 112,000 Gross profit $122,500 Operating expenses 143,000 Loss from operations $(20,500) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 18% of the…
Differential Analysis for a Lease or Sell Decision: Inman Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $399,100 less accumulated depreciation of $120,600) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700. Prepare a differential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.
Want such correct option
.
Differential Analysis for a Lease-or-Sell Decision Matrix Construction Company is considering selling excess machinery with a book value of $75,000 (original cost of $200,000 less accumulated depreciation of $125,000) for $60,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $75,000 for five years, after which it is expected to have no residual value. During the period of the lease, Matrix Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $21,500. a. Prepare a differential analysis, dated May 25 to determine whether Matrix should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery(Alternative 1) Sell Machinery(Alternative 2) Differential Effecton Income(Alternative…
Differential Analysis for a Lease-or-Sell Decision Sure-Bilt Construction Company is considering selling excess machinery with a book value of $280,600 (original cost of $398,600 less accumulated depreciation of $118,000) for $277,700, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $286,000 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,500. Question Content Area a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisLease Machinery (Alt. 1) or Sell Machinery (Alt. 2)May 25 Lease Machinery(Alternative 1) Sell Machinery(Alternative 2) Differential…