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
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
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 Effect on Income (Alternative 2) |
|
| Revenues | $fill in the blank fc9d75071f97064_1 | $fill in the blank fc9d75071f97064_2 | $fill in the blank fc9d75071f97064_3 |
| Costs | fill in the blank fc9d75071f97064_4 | fill in the blank fc9d75071f97064_5 | fill in the blank fc9d75071f97064_6 |
| Income (Loss) | $fill in the blank fc9d75071f97064_7 | $fill in the blank fc9d75071f97064_8 | $fill in the blank fc9d75071f97064_9 |
b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
The net from selling is $fill in the blank 7f6a23ffbfae05e_3.
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