Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $283,100 (original cost of $401,700 less accumulated depreciation of $118,600) for $276,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $283,900 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 $25,800. Question Content Area 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. Differential AnalysisLease (Alt. 1) or Sell (Alt. 2) MachineryJanuary 15 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effects (Alternative 2) Revenues $fill in the blank 984f9cff802e050_1 $fill in the blank 984f9cff802e050_2 $fill in the blank 984f9cff802e050_3 Costs fill in the blank 984f9cff802e050_4 fill in the blank 984f9cff802e050_5 fill in the blank 984f9cff802e050_6 Profit (Loss) $fill in the blank 984f9cff802e050_7 $fill in the blank 984f9cff802e050_8 $fill in the blank 984f9cff802e050_9 Question Content Area b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

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 $283,100 (original cost of $401,700 less accumulated depreciation of $118,600) for $276,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $283,900 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 $25,800.

Question Content Area

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.

Differential AnalysisLease (Alt. 1) or Sell (Alt. 2) MachineryJanuary 15

	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 984f9cff802e050_1	$fill in the blank 984f9cff802e050_2	$fill in the blank 984f9cff802e050_3
Costs	fill in the blank 984f9cff802e050_4	fill in the blank 984f9cff802e050_5	fill in the blank 984f9cff802e050_6
Profit (Loss)	$fill in the blank 984f9cff802e050_7	$fill in the blank 984f9cff802e050_8	$fill in the blank 984f9cff802e050_9

Question Content Area

b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

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