Assume that Win Co. is considering disposing of equipment that cost $72,020.00 a

Question

Assume that Win Co. is considering disposing of equipment that cost $72,020.00 and has $50,414.00 of accumulated depreciation to date. Win Co. can sell the equipment through a broker for $25,132.00 less 7% commission. Alternatively, But Co. has offered to lease the equipment for five years for a total of $46,087.00. Win will incur repair, insurance, and property tax expenses estimated at $10,295.00. 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.

$14,186.00

$46,087.00

$23,372.76

$12,419.24

Explanation / Answer

Ans) Option (D) $12419.24

Proceeds from sale of equipment through a broker = 23372.76

(25132 - 25132 X 7%)

Proceeds from leasing the equipment = 35792

(46087 - 10295)

Net differential income from leasing = 12419.24

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