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Lease or Sell Decision

Sure-Bilt Industries is considering selling excess machinery with a book value of $278,100 (original cost of $399,300 less accumulated depreciation of $121,200) for $274,400 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $285,100 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,600.

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a. Prepare a differential analysis report for the lease or sell decision.

SURE-BILT INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report

Differential revenue from alternatives:
CashDepreciationNotes PayableNotes ReceivableRevenue from leaseRevenue from lease	$Revenue from lease
Commission on saleDepreciationNotes payableLoss on saleProceeds from saleProceeds from sale	Proceeds from sale
Commission on saleDepreciationDifferential revenue from leaseNotes payableRepairs, insurance, and property tax expenses from leaseDifferential revenue from lease		$Differential revenue from lease
Differential cost of alternatives:
Accounts payableDepreciationNotes payableProceeds from saleRepairs, insurance, and property tax expenses from leaseRepairs, insurance, and property tax expenses from lease	$Repairs, insurance, and property tax expenses from lease
CashCommission on saleLoss from saleNotes PayableRevenue from leaseCommission on sale	Commission on sale
Accounts payableCommission on saleDifferential cost of leaseDifferential revenue from leaseProceeds from saleDifferential cost of lease		Differential cost of lease
Differential cost of leaseDifferential cost of saleNet differential income from lease alternativeNet differential loss from lease alternativeNet differential income from lease alternative		$