Lease or Sell Decision Sure-Bilt Industries is considering selling excess machinery with a book value of $281,500 (original cost of $401,300 less accumulated depreciation of $119,800) for $275,000 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $284,900 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,900. a. Prepare a differential analysis report for the lease or sell decision. SURE-BILT INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differential revenue from alternatives: Revenue from lease v Proceeds from sale Differential revenue from lease v Differential cost of alternatives: Repairs, insurance, and property tax expenses from lease v Commission on sale Differential cost of lease Net differential gain from lease alternative

Lease or Sell Decision Sure-Bilt Industries is considering selling excess machinery with a book value of $281,500 (original cost of $401,300 less accumulated depreciation of $119,800) for $275,000 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $284,900 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,900. a. Prepare a differential analysis report for the lease or sell decision. SURE-BILT INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differential revenue from alternatives: Revenue from lease v Proceeds from sale Differential revenue from lease v Differential cost of alternatives: Repairs, insurance, and property tax expenses from lease v Commission on sale Differential cost of lease Net differential gain from lease alternative

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...

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Differential Analysis for a Lease or Sell Decision: Inman Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $399,100 less accumulated depreciation of $120,600) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700. Prepare a differential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.
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Differential Analysis for a Lease or Sell Decision Granite Construction Company is considering selling excess machinery with a book value of $279,500 (original cost of $401,200 less accumulated depreciation of $121,700) for $276,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $283,400 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,400. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery. Differential Analysis. Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) November 7 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs Income (Loss) 1000
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Differential Analysis for a Lease or Sell Decision Granite Construction Company is considering selling excess machinery with a book value of $282,600 (original cost of $401,600 less accumulated depreciation of $119,000) for $276,300, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,500 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,100. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) November 7 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs Income (Loss) $ $ $ b. On the basis of…
Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $398,600 less accumulated depreciation of $120,100) for $277,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $287,300 for 5 years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,900. a. Prepare a differential analysis dated March 21 to determine whether Stowe Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery March 21 Lease Sell Line Item Description Machinery Machinery M 24,900 ✔ Revenues Costs Profit (loss) Feedback Check My Work Differential Effects (Alternative 1) (Alternative 2)…
Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $279,600 (original cost of $399,400 less accumulated depreciation of $119,800) for $274,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,200 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,900. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 LeaseMachinery(Alternative 1) SellMachinery(Alternative 2) DifferentialEffects(Alternative 2) Revenues $fill in the blank…
Differential Analysis for a Lease-or-Sell Decision Matrix Construction Company is considering selling excess machinery with a book value of $75,000 (original cost of $200,000 less accumulated depreciation of $125,000) for $60,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $75,000 for five years, after which it is expected to have no residual value. During the period of the lease, Matrix Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $21,500. a. Prepare a differential analysis, dated May 25 to determine whether Matrix should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery(Alternative 1) Sell Machinery(Alternative 2) Differential Effecton Income(Alternative…
Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $277,900 (original cost of $398,200 less accumulated depreciation of $120,300) for $274,300, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,000 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Lease Sell Differential Machinery Machinery Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Profit (Loss) b. On the basis of…
Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $282,000 (original cost of $400,500 less accumulated depreciation of $118,500) for $276,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $286,200 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Revenues Costs Profit (Loss) Lease Sell Differential Machinery Machinery Effects (Alternative 1) (Alternative 2) (Alternative 2) $ b. On the basis…
Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $281,600 (original cost of $402,000 less accumulated depreciation of $120,400) for $277,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $286,300 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 LeaseMachinery(Alternative 1) SellMachinery(Alternative 2) DifferentialEffects(Alternative 2) Revenues ? ? ? Costs ? ? ?…