Lease or Sell Bullwinkle Company owns equipment with a cost of $364,600 and accumulated depreciation of $54,200 that can be sold for $277,500, less a 4% sales commission. Alternatively, Bullwinkle Company can lease the equipment for 3 years for a total of $284,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Bullwinkle Company on the equipment would total $16,800 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Bullwinkle 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) October 29 Lease Line Item Description Equipment Revenues Costs Sell Differential Effects Equipment (Alternative 1) (Alternative 2) (Alternative 2) Profit (Loss) b. Should Bullwinkle Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Lease or Sell Bullwinkle Company owns equipment with a cost of $364,600 and accumulated depreciation of $54,200 that can be sold for $277,500, less a 4% sales commission. Alternatively, Bullwinkle Company can lease the equipment for 3 years for a total of $284,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Bullwinkle Company on the equipment would total $16,800 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Bullwinkle 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) October 29 Lease Line Item Description Equipment Revenues Costs Sell Differential Effects Equipment (Alternative 1) (Alternative 2) (Alternative 2) Profit (Loss) b. Should Bullwinkle 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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