6

Keating Co. is considering disposing of equipment with a cost of $53,000 and accumulated depreciation of $37,100. Keating Co. can sell the equipment through a broker for $30,000, less a 6% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $47,000. Keating will incur repair, insurance, and property tax expenses estimated at $12,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is

a. $6,800

b. $10,200

c. $4,760

d. $8,160