Question
Lease or Sell Astro Company owns equipment with a cost of $362,600 and accumulated depreciation of $56,200 that can be sold for $275,500, less a
Lease or Sell Astro Company owns equipment with a cost of $362,600 and accumulated depreciation of $56,200 that can be sold for $275,500, less a 4% sales commission. Alternatively, Astro Company can lease the equipment for three years for a total of $287,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $16,600 over the three year lease. a. Prepare a differential analysis on February 18, as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Equipment February 18 Revenues Costs Income (Loss) Differential Effect Lease Equipment (Alternative 1) Sell Equipment (Alternative 2) on Income (Alternative 2) b. Should Astro Company lease (Alternative 1) or sell (Alternative 2) the equipment
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started