Differentlal Analysis for a Lease-or-Sell DecisionMatrix 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 canbe 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 areexpected to be $21,500.a. Prepare a differential analysls, 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 AnalysisLease Machinery (Alt. 1) or Sell Machinery (Alt. 2)May 25Differential EffectLease MachinerySell Machineryon Income(Alternative 1)(Alternative 2)(Alternative 2)RevenuesCostsIncome (Loss)FeedbackCheck My Workb. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.Sell the machineryThe net gain from selling is $ еВookShow Me HowDifferential Analysis for a Discontinued ProductA condensed income statement by product line for Celestial Beverage Inc. indicated the following for Star Cola for the past year:Sales$390,000Cost of goods sold184,000Gross profit$206,000Operating expenses255,000Loss from operations$(49,000)It is estimated that 20% of the cost of goods sold represents fixed factory overhead costs and that 30% of the operating expenses are fixed. Because Star Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.a. Prepare a differential analysis dated January 21 to determine whether Star Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.Differential AnalysisContinue Star Cola (Alt. 1) or Discontinue Star Cola (Alt. 2)January 21Differential EffectContinue StarDiscontinue Staron Income(Alternative 2)Cola (Alternative 1) Cola (Alternative 2)RevenuesCosts:Variable cost of goods soldVariable operating expensesFixed costsIncome (Loss)Feedback

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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 5 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 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 Differential Effect Sell Machinery (Alternative 2) Lease Machinery on Income (Alternative 2) (Alternative 1) Revenues Costs Income (Loss) Feedback b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. Sell the machinery The net gain V from selling is $

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 5 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 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 Differential Effect Sell Machinery (Alternative 2) Lease Machinery on Income (Alternative 2) (Alternative 1) Revenues Costs Income (Loss) Feedback b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. Sell the machinery The net gain V from selling is $

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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