9.1

Claxon Company owns a machine with a cost of $301,010 and accumulated depreciation of $66,890 that can be sold for $264,400, less a 4% sales commission. Alternatively, the machine can be leased by Claxon Company for three years for a total of $275,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Claxon Company on the machine would total $18,416 over the three years.

Required:

1.

Prepare a differential analysis on January 12 as to whether Claxon Company should lease (Alternative 1) or sell (Alternative 2) the machine. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter 0. A colon (:) will automatically appear if required.

2.

Should Claxon Company lease (Alternative 1) or sell (Alternative 2) the machine?

Amount Descriptions
Costs
Income (loss)
Revenues

Differential Analysis

Lease (Alternative 1) or Sell (Alternative 2) Machine

January 12

1		Lease Machine	Sell Machine	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5