Exercises 1. Grimstone Construction Company is considering selling excess machinery with a book value of $200,000 (original cost of $355,000 less accumulated depreciation of $155,000) for $205,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $225,000 for four years, after which it is expected to have no residual value. During the period of the lease, Grimstone Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $34,400. a. Prepare a differential analysis, dated November 30th to determine whether Grimstone should lease (Alternative 1) or sell (Alternative 2) the machinery. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Exercises 1. Grimstone Construction Company is considering selling excess machinery with a book value of $200,000 (original cost of $355,000 less accumulated depreciation of $155,000) for $205,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $225,000 for four years, after which it is expected to have no residual value. During the period of the lease, Grimstone Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $34,400. a. Prepare a differential analysis, dated November 30th to determine whether Grimstone should lease (Alternative 1) or sell (Alternative 2) the machinery. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercises
1. Grimstone Construction Company is considering selling
excess machinery with a book value of $200,000 (original
cost of $355,000 less accumulated depreciation of
$155,000) for $205,000, less a 5% brokerage commission.
Alternatively, the machinery can be leased for a total of
$225,000 for four years, after which it is expected to have
no residual value. During the period of the lease, Grimstone
Construction Company's costs of repairs, insurance, and
property tax expenses are expected to be $34,400.
a. Prepare a differential analysis, dated November 30th
to determine whether Grimstone should lease
(Alternative 1) or sell (Alternative 2) the machinery.
b. On the basis of the data presented, would it be
advisable to lease or sell the machinery? Explain.
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