9.1x

Eclipse Construction Company is considering selling excess machinery with a book value of $304,400 (original cost of $427,700 less accumulated depreciation of $123,300) for $211,900, less a 4% brokerage commission. Alternatively, the machinery can be leased for a total of $206,540 for five years, after which it is expected to have no residual value. During the period of the lease, Eclipse Construction Companys costs of repairs, insurance, and property tax expenses are expected to be $11,496.

Required:

A.

Prepare a differential analysis, dated April 16 to determine whether Eclipse should lease (Alternative 1) or sell (Alternative 2) the machinery. 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.

B.

On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.

Amount Descriptions

Costs

Income (loss)

Revenues

A. Prepare a differential analysis, dated April 16 to determine whether Eclipse should lease (Alternative 1) or sell (Alternative 2) the machinery. 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.

Question not attempted.

Score: 0/51

Differential Analysis

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

April 16

1		Lease Machinery	Sell Machinery	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
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