1-2018SP-Reeder-OL (Jan to Mayl: Link to Cengage CengageNOWv2 1 Online teaching
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Question
1-2018SP-Reeder-OL (Jan to Mayl: Link to Cengage CengageNOWv2 1 Online teaching and learning resource from Cengage Learning eBook ' Show Me How Cakulator Differential Analysis for a Lease or Sell Decision Granite Construction Company is considering selling excess machinery with a book value of $277,200 (original cost of $398,900 less accumulated depreciation of $121,700) for $275,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,800 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,500. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) November 7 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Dfferential Effect on Income (Alternative 2) Revenues Costs ] Income (Loss) b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Previous Net All work saved.Explanation / Answer
Answer
Differential Analysis
Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2)
November 7
From the above analysis It would be advise to sell the machinery.
Best option for machinery is sell.
Lease Machinery(Alt. 1) Sell Machinery(Alt. 2) Differential Effect on Income(Alt. 2) Revenues $285800 $275900 $9900 Cost $26500 $275900*5% =$13795 $12705 Income or Loss $259300 $262105 ($2805)Related Questions
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