Kincaid Company owns equipment with a cost of $362,000 and accumulated depreciation of $56,000 that can be sold for $275,600, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment for three years for a total of $288,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,800 over the three year lease. a. Prepare a differential analysis on August 7 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) August 7 Lease Sell Differential Effects Equipment (Alternative 1) (Alternative 2) (Alternative 2) Equipment Revenues Costs Profit (Loss) b. Should Kincaid Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Kincaid Company owns equipment with a cost of $362,000 and accumulated depreciation of $56,000 that can be sold for $275,600, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment for three years for a total of $288,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,800 over the three year lease. a. Prepare a differential analysis on August 7 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) August 7 Lease Sell Differential Effects Equipment (Alternative 1) (Alternative 2) (Alternative 2) Equipment Revenues Costs Profit (Loss) b. Should Kincaid Company lease (Alternative 1) or sell (Alternative 2) the equipment?

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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