Sure-Bilt Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of

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Sure-Bilt Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of $400,000 less accumulated depreciation of $120,000) for $276,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,000 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $25,500.
a. Prepare a differential analysis, dated January 3, 2012, to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery.
b.  On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.

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Accounting

ISBN: 9780538475006

24th Edition

Authors: Carl S Warren, James M Reeve, Jonathan Duchac

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