Differential Analysis for a Lease or Sell Decision

Burlington Construction Company is considering selling excess machinery with a book value of $278,800 (original cost of $398,300 less accumulated depreciation of $119,500) for $276,300, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $286,700 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,000.

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a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss.

Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15

	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 7e000403cfe7fa0_1	$fill in the blank 7e000403cfe7fa0_2	$fill in the blank 7e000403cfe7fa0_3
Costs	fill in the blank 7e000403cfe7fa0_4	fill in the blank 7e000403cfe7fa0_5	fill in the blank 7e000403cfe7fa0_6
Profit (Loss)	$fill in the blank 7e000403cfe7fa0_7	$fill in the blank 7e000403cfe7fa0_8	$fill in the blank 7e000403cfe7fa0_9

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