Assume that Win Co. is considering disposing of equipment that cost $71,921.00 a

Question

Assume that Win Co. is considering disposing of equipment that cost $71,921.00 and has $50,344.70 of accumulated depreciation to date. Win Co. can sell the equipment through a broker for $25,189.00 less 9% commission. Alternatively, But Co. has offered to lease the equipment for five years for a total of $46,482.00. Win will incur repair, insurance, and property tax expenses estimated at $10,982.00. At lease-end, the equipment is expected to have no residual value. Determine the net differential income from the lease alternative.

$12,578.01 $46,482.00 $22,921.99 $13,923.70

Explanation / Answer

Calculate the income from sale of equipment:

Calculate the net value of lease:

Now calculate the net differential income from the lease:

Therefore, the net differential income from the lease is $12,578.

Particulars Amount ($) Sales value of asset 25,189 Less: Brokerage commission ($25,189*9/100) 2267 Income derived from sale of equipment 22,922

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