Differential Analysis for a Lease-or-Sell Decision Rhombus Construction Company is considering selling excess machinery with a book value of $125,000 (original cost of $340,000 less accumulated depreciation of $215,000) for $102,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $125,000 for 5 years, after which it is expected to have no residual value. During the period of the lease, Rhombus Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $36,500. Question Content Area a. Prepare a differential analysis, dated May 25 to determine whether Rhombus 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. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Differential Analysis for a Lease-or-Sell Decision
Rhombus Construction Company is considering selling excess machinery with a book value of $125,000 (original cost of $340,000 less
Question Content Area
a. Prepare a differential analysis, dated May 25 to determine whether Rhombus 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.
b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
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