Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is considering selling excess machinery with a book value of $25,000 (original cost of $180,000 less accumulated depreciation of $155,000) for $35,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $48,000 for 4 years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $12,000. a. Prepare a differential analysis dated March 21 to determine whether Stowe Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery March 21 Lease Sell Line Item Description Machinery Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) 88 Revenues Costs Profit (loss) b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is considering selling excess machinery with a book value of $25,000 (original cost of $180,000 less accumulated depreciation of $155,000) for $35,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $48,000 for 4 years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $12,000. a. Prepare a differential analysis dated March 21 to determine whether Stowe Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery March 21 Lease Sell Line Item Description Machinery Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) 88 Revenues Costs Profit (loss) 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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