Lease or Sell Astro Company owns equipment with a cost of $363 700 and accumulat

Question

Lease or Sell Astro Company owns equipment with a cost of $363 700 and accumulated depreciation of $53800 that can be sold or s277 400 ess a 5% sales commission. Alternatively, Astro Company can lease the equipment for three years for a total of $284, 400, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $15,900 over the three year lease. a. Prepare a differential analysis on February 18, as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Equipment February 18 Lease Equipment (Altemative 1) Sell Equipment (Alternative 2) Differential Effect on Income (Alternative 2) 284.400 309.900 X S -25.500 X 284,400X 309.9001 x 5 -25,500 X Revenues Costs income (Loss) 25,500 T Check My Work Subtract the lease costs from the lease revenues. Subtract the sell machine costs from the sell machine revenues. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1. Learning Objective 1. Check My Work 4 more Check My Work uses remaining Next

Explanation / Answer

Answer

differential analysis

lease equipment sell equipment differential effect on income revenue 284400 277400 7000 cost -15900 -13870 ( 277400 * 0.05) -2030 income / loss 268500 263530 4970

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