Assume that Win Co. is considering disposing of equipment that cost $50,537.00 a

ID: 2469777 • Letter: A

Question

Assume that Win Co. is considering disposing of equipment that cost $50,537.00 and has $35,375.90 of accumulated depreciation to date. Win Co. can sell the equipment through a broker for $26,056.00 less 9% commission. Alternatively, But Co. has offered to lease the equipment for five years for a total of $49,837.00. Win will incur repair, insurance, and property tax expenses estimated at $8,526.00. 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. $26,149.90 $49,837.00 $23,710.96 $17,600.04

Explanation / Answer

Solution :

Income from Lease

49,837.00

Less : repair, insurance, and property tax expenses

- 8,526.00

Net Income from Lease

41,311.00

Less : net sale value of equipment (26056*0.91)

23,710.96

net differential income from the lease alternative.

17,600.04