Finch, Inc., has purchased a new server and must decide what to do with the old one. The cost of the old server was originally $60,000 and has been depreciated $45,000. The company has received two offers. One offer was to lease the equipment for $7,000 for the next five years, but the company will be required to provide maintenance and insurance totaling $3,000 per year. The other offer was made to purchase the equipment outright for $18,500 less a 5% sales commission. Prepare a differential analysis. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alternative 1) or Sell (Alternative 2) Server   Lease Server (Alternative 1) Sell Server (Alternative 2) Differential Effects (Alternative 2) Revenues $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Costs fill in the blank 4 fill in the blank 5 fill in the blank 6 Profit (loss) $fill in the blank 7 $fill in the blank 8 $fill in the blank 9

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Finch, Inc., has purchased a new server and must decide what to do with the old one. The cost of the old server was originally $60,000 and has been depreciated $45,000. The company has received two offers. One offer was to lease the equipment for $7,000 for the next five years, but the company will be required to provide maintenance and insurance totaling $3,000 per year. The other offer was made to purchase the equipment outright for $18,500 less a 5% sales commission.

Prepare a differential analysis. If required, use a minus sign to indicate a loss.

Differential Analysis
Lease (Alternative 1) or Sell (Alternative 2) Server
  Lease Server
(Alternative 1)
Sell Server
(Alternative 2)
Differential
Effects
(Alternative 2)
Revenues $fill in the blank 1 $fill in the blank 2 $fill in the blank 3
Costs fill in the blank 4 fill in the blank 5 fill in the blank 6
Profit (loss) $fill in the blank 7 $fill in the blank 8 $fill in the blank 9

 

Which offer should Finch, Inc., accept?
 

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