Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,120. The freight and installation costs for the equipment are $630. If purchased, annual repairs and maintenance are estimated to be $380 per year over the 4-year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,320 per year for 4 years, with no additional costs. a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Costs: Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment February 12 Line Item Description Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Total costs Differential Effects Lease Buy Equipment Equipment. (Alternative 1) (Alternative 2) (Alternative 2) 00000 1010000 1010000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Homework help. Chapter 25, number 2. Need helping filling in the blanks. Thank you!

Differential Analysis for a Lease-or-buy Decision
Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,120. The freight and installation costs for the equipment are $630. If purchased, annual repairs and
maintenance are estimated to be $380 per year over the 4-year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,320 per year for 4 years, with no
additional costs.
a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must
be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0".
Costs:
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
February 12
Line Item Description
Purchase price
Freight and installation
Repair and maintenance (4 years)
Lease (4 years)
Total costs
Lease
Buy
Equipment Equipment
(Alternative 1) (Alternative 2) (Alternative 2)
Differential
Effects
100000
Transcribed Image Text:Differential Analysis for a Lease-or-buy Decision Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,120. The freight and installation costs for the equipment are $630. If purchased, annual repairs and maintenance are estimated to be $380 per year over the 4-year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,320 per year for 4 years, with no additional costs. a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Costs: Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment February 12 Line Item Description Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Total costs Lease Buy Equipment Equipment (Alternative 1) (Alternative 2) (Alternative 2) Differential Effects 100000
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