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Can you please help with the incorrect ones? thanks! Differential Analysis for a Lease-or-Sell Decision Inman Construction Company is considering selling excess machinery with a
Can you please help with the incorrect ones? thanks!
Differential Analysis for a Lease-or-Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $280,100 (original cost of $400,700 less accumulated depreciation of $120,600) for $278,000, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $286,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,800. a. Prepare a differential analysis, dated May 25 to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery Sell Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues 286,100 s 278,000 8,100 X Costs 25,800 X 13,900 11,900 Profit (loss) 260,300 $ 264,100 -3,800 x Feedback Check My Work Subtract the lease costs from the lease revenues. Subtract the sell machinery costs from the sell machinery revenues. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. Sell the machinery The net gain from selling is $ 264,100 XStep by Step Solution
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