Lease or Sell Felix Company owns equipment with a cost of $365,800 and accumulat

Question

Lease or Sell Felix Company owns equipment with a cost of $365,800 and accumulated depreciation of $52,000 that can be sold for $273,600, less a 4% sales commission. Alternatively, Felix Company can lease the equipment for three years for a total of $286,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Felix Company on the equipment would total $15,300 over the three year lease. a. Prepare a differential analysis on February 18, as to whether Felilx 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 (Alternative 1) Sell Equpment (Alternative 2) Differential Effect on Income (Alternative 2) Costs Income (Loss) b. Should Felik Company lease (Alternative 1) or sell (Alternative 2) the machine? Lease the machine Sell the machine Previous Next Time Remaining: 2:49.0 All work saved. Email Instructor Submit Test for Grading O Type here to search

Explanation / Answer

Lease Sell the Differential Equipment Equipment Effect Revenues 286000 273600 -12400 Cost -15300 -10944 4356 Income/ (loss) 270700 262656 -8044 Company shall LEASE THE EQUIPMENT

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