Differential Analysis Report for Lease or Sell Inman Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of $400,000 less accumulated depreciation of $120,000) for $292,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $312,000 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $36,000. Instructions: a. Prepare a differential analysis report, dated January 3, 20Y9, for the lease or sell decision. b. Based on the data presented, would it be advisable to lease or sell the machinery? Enter the appropriate amount in the shaded cells below. A red asterisk (*) will appear to the right of an incorrect amount in the outlined cells. a. 3 b. Proposal to Lease or Sell Machinery January 3, 20Y9 Differential revenue from alternatives: Revenue from lease Proceeds from sale Differential revenue from lease Differential cost of alternatives: Repair, insurance, and property tax expenses Commission on sale Differential cost of lease Net differential income from lease alternatives Is it advisable to lease or sell the machinery?
Differential Analysis Report for Lease or Sell Inman Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of $400,000 less accumulated depreciation of $120,000) for $292,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $312,000 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $36,000. Instructions: a. Prepare a differential analysis report, dated January 3, 20Y9, for the lease or sell decision. b. Based on the data presented, would it be advisable to lease or sell the machinery? Enter the appropriate amount in the shaded cells below. A red asterisk (*) will appear to the right of an incorrect amount in the outlined cells. a. 3 b. Proposal to Lease or Sell Machinery January 3, 20Y9 Differential revenue from alternatives: Revenue from lease Proceeds from sale Differential revenue from lease Differential cost of alternatives: Repair, insurance, and property tax expenses Commission on sale Differential cost of lease Net differential income from lease alternatives Is it advisable to lease or sell the machinery?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Differential Analysis Report for Lease or Sell
Inman Construction Company is considering selling excess machinery with a book value of $280,000
(original cost of $400,000 less accumulated depreciation of $120,000) for $292,000, less a 5% brokerage
commission. Alternatively, the machinery can be leased for a total of $312,000 for five years, after which it
is expected to have no residual value. During the period of the lease, Inman Construction Company's
costs of repairs, insurance, and property tax expenses are expected to be $36,000.
Instructions:
a. Prepare a differential analysis report, dated January 3, 20Y9, for the lease or sell decision.
b. Based on the data presented, would it be advisable to lease or sell the machinery?
Enter the appropriate amount in the shaded cells below.
A red asterisk (*) will appear to the right of an incorrect amount in the outlined cells.
a.
3
b.
Proposal to Lease or Sell Machinery
January 3, 20Y9
Differential revenue from alternatives:
Revenue from lease
Proceeds from sale
Differential revenue from lease
Differential cost of alternatives:
Repair, insurance, and property tax expenses
Commission on sale
Differential cost of lease
Net differential income from lease alternatives
Is it advisable to lease or sell the machinery?
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