On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the co could use the funds to invest in $150,600 of 6% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data hav assembled: Cost of store equipment $150,600 Life of store equipment 16 years Estimated residual value of store equipment $18,400 Yearly costs to operate the warehouse, excluding depreciation of equipment $56,000 Yearly expected revenues-years 1-8 75,000 Yearly expected revenues-years 9-16 69,600 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) as compared with investing in Treasury bonds (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1 Operate Invest in Differential Warehouse Bonds Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Costs to operate warehouse Cost of equipment less residual value Drofit (L Oss)

On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the co could use the funds to invest in $150,600 of 6% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data hav assembled: Cost of store equipment $150,600 Life of store equipment 16 years Estimated residual value of store equipment $18,400 Yearly costs to operate the warehouse, excluding depreciation of equipment $56,000 Yearly expected revenues-years 1-8 75,000 Yearly expected revenues-years 9-16 69,600 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) as compared with investing in Treasury bonds (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1 Operate Invest in Differential Warehouse Bonds Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Costs to operate warehouse Cost of equipment less residual value Drofit (L Oss)

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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