Wake Coffee Co. has a piece of equipment no longer needed for production. The company purchased the equipment for $75,000 and has accumulated depreciation of $10,000 related to the equipment. Wake Coffee Co. has determined it can either lease the equipment for the next ten years, for yearly revenues of $9,000, or sell the equipment for $70,000. If leased, the company expects to incur repairs and other expenses of $22,000 over the life of the lease. The equipment would also have a $3,500 salvage value. If sold, the broker requires a 4% broker commission. Prepare a differential analysis to determine if the company should sell (Alternative 1) or lease (Alternative 2) the equipment.

Wake Coffee Co. has a piece of equipment no longer needed for production. The company purchased the equipment for $75,000 and has accumulated depreciation of $10,000 related to the equipment. Wake Coffee Co. has determined it can either lease the equipment for the next ten years, for yearly revenues of $9,000, or sell the equipment for $70,000. If leased, the company expects to incur repairs and other expenses of $22,000 over the life of the lease. The equipment would also have a $3,500 salvage value. If sold, the broker requires a 4% broker commission. Prepare a differential analysis to determine if the company should sell (Alternative 1) or lease (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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