Sure-Bilt Construction Company is considering selling excess machinery with a book value of $281,400 (original cost of $400,900 less accumulated depreciation of $119,500) for $275,200, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $286,100 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,400. a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt 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
Differential Analysis for a Lease-or-Sell Decision
Sure-Bilt Construction Company is considering selling excess machinery with a book value of $281,400 (original cost of $400,900 less
a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt 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.
| Lease Machinery (Alternative 1) |
Sell Machinery (Alternative 2) |
Differential Effects (Alternative 2) |
|
| Revenues | $fill in the blank | $fill in the blank | $fill in the blank |
| Costs | fill in the blank | fill in the blank | fill in the blank |
| $fill in the blank | $fill in the blank | $fill in the blank |
b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
The net fill in the blank from selling is $fill in the blank.
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