Differential Analysis for a Lease-or-Sell Decision Sure-Bilt Construction Company is considering selling excess machinery with a book value of $283,000 (original cost of $401,300 less accumulated depreciation of $118,300) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $285,900 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,300. a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt 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 Differential Effect on Income (Alternative 2) Lease Machinery Sell Machinery (Alternative 1) (Alternative 2) Revenues Costs Income (Loss) b. On the basis of the data presented, would it be advisable to lease or selll the machinery? Explain from selling is $ Lease the machinery Sell the machinery Check My Work 2 more Check My Work uses remaining. Next
Differential Analysis for a Lease-or-Sell Decision Sure-Bilt Construction Company is considering selling excess machinery with a book value of $283,000 (original cost of $401,300 less accumulated depreciation of $118,300) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $285,900 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,300. a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt 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 Differential Effect on Income (Alternative 2) Lease Machinery Sell Machinery (Alternative 1) (Alternative 2) Revenues Costs Income (Loss) b. On the basis of the data presented, would it be advisable to lease or selll the machinery? Explain from selling is $ Lease the machinery Sell the machinery Check My Work 2 more Check My Work uses remaining. Next
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Differential Analysis for a Lease-or-Sell Decision
Sure-Bilt Construction Company is considering selling excess machinery with a book value of $283,000 (original cost of $401,300 less accumulated depreciation of $118,300)
for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $285,900 for five years, after which it is expected
to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,300.
a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt 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
Differential Effect
on Income
(Alternative 2)
Lease Machinery Sell Machinery
(Alternative 1)
(Alternative 2)
Revenues
Costs
Income (Loss)
b. On the basis of the data presented, would it be advisable to lease or selll the machinery? Explain
from selling is $
Lease the machinery
Sell the machinery
Check My Work 2 more Check My Work uses remaining.
Next
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