Question
Claxon Company owns a machine with a cost of $301,000 and accumulated depreciation of $64,430 that can be sold for $266,900, less a 4% sales
Claxon Company owns a machine with a cost of $301,000 and accumulated depreciation of $64,430 that can be sold for $266,900, less a 4% sales commission. Alternatively, the machine can be leased by Claxon Company for three years for a total of $277,610, 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 $19,286 over the three years.
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.
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 | Revenues | $277,610.00 | ||
4 | Costs | (19,286.00) | ||
5 | Income (loss) | $258,324.00 |
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