Question
Inman Construction Company is considering selling excess machinery with a book value of $280,800 (original cost of $399,200 less accumulated depreciation of $118,400) for $277,900,
Inman Construction Company is considering selling excess machinery with a book value of $280,800 (original cost of $399,200 less accumulated depreciation of $118,400) for $277,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,600 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 $25,600.
a.Prepare adifferential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.
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