Ferrigno Company owns equipment with a cost of $225,000 and accumulated depreciation of $81,000 that can be sold for $113,000 less a 6% sales commission. Alternatively, Ferrigno Company can lease the equipment to another company for 5 years for a total of $115,100, at the end of which there i: no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Ferrigno Company on the equipment would total $11,890 over the 5 years. Prepare a differential analysis on March 23 as to whether Ferrigno Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Ferrigno Company owns equipment with a cost of $225,000 and accumulated depreciation of $81,000 that can be sold for $113,000 less a 6% sales commission. Alternatively, Ferrigno Company can lease the equipment to another company for 5 years for a total of $115,100, at the end of which there i: no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Ferrigno Company on the equipment would total $11,890 over the 5 years. Prepare a differential analysis on March 23 as to whether Ferrigno Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

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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Question

Lease or Sell
Ferrigno Company owns equipment with a cost of $225,000 and accumulated depreciation of $81,000 that can be sold for $113,000 less a 6% sales
commission. Alternatively, Ferrigno Company can lease the equipment to another company for 5 years for a total of $115,100, at the end of which there is
no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Ferrigno Company on the equipment would total
$11,890 over the 5 years.
Prepare a differential analysis on March 23 as to whether Ferrigno Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those
boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis
Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2)
March 23
Differential
Lease
Sell
Effect
Equipment
(Alternative 1) (Alternative 2)
Equipment
(Alternative 2)
Revenues
Costs
Profit (loss)
Should Ferrigno Company lease (Alternative 1) or sell (Alternative 2) the equipment?

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