Assume that Win Co. is considering disposing of equipment that cost $50,035.00 a

Question

Assume that Win Co. is considering disposing of equipment that cost $50,035.00 and has $35,024.50 of accumulated depreciation to date. Win Co. can sell the equipment through a broker for $26,759.00 less 6% commission. Alternatively, But Co. has offered to lease the equipment for five years for a total of $47,058.00. Win will incur repair, insurance, and property tax expenses estimated at $10,590.00. At lease-end, the equipment is expected to have no residual value. Determine the net differential income from the lease alternative.

Select the correct answer.

$11,314.54 $25,153.46 $47,058.00 $21,457.50

Explanation / Answer

$11,314.54 Statement showing computations Particulars Use own Equipment Lease Differential Costs less Commission = 26,759 * .94                                    25,153.46                 25,153.46 Repair, insurance, and property tax expenses                                      10,590.00                 10,590.00 Lease Costs             47,058.00               (47,058.00) Total costs                                    35,743.46             47,058.00               (11,314.54)

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