Lease or Sell

Bullwinkle Company owns equipment with a cost of $$361,600$ and accumulated depreciation of $$56,500$ that can be sold for $$275,900,$ less a $3\%$ sales commission. Alternatively, Bullwinkle Company can lease the equipment for three years for a total of $$288,200,$ at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Bullwinkle Company on the equipment would total $$16,400$ over the three year lease.

Question Content Area

a$.$ Prepare a differential analysis on August $7$ as to whether Bullwinkle Company should lease $($Alternative $1)$ or sell $($Alternative $2)$ the equipment. If required, use a minus sign to indicate a loss.

Differential Analysis

Lease Equipment $($Alt$.1)$ or Sell Equipment $($Alt$.2)$

August $7$

Lease

Equipment

$($Alternative $1)$ Sell

Equipment

$($Alternative $2)$ Differential

Effects

$($Alternative $2)$

Revenues $fill in the blank d$2$bb$1005$f$05$afda$\_1$ $fill in the blank d$2$bb$1005$f$05$afda$\_2$ $fill in the blank d$2$bb$1005$f$05$afda$\_3$

Costs fill in the blank d$2$bb$1005$f$05$afda$\_4$ fill in the blank d$2$bb$1005$f$05$afda$\_5$ fill in the blank d$2$bb$1005$f$05$afda$\_6$

Profit $($Loss$)$ $fill in the blank d$2$bb$1005$f$05$afda$\_7$ $fill in the blank d$2$bb$1005$f$05$afda$\_8$ $fill in the blank d$2$bb$1005$f$05$afda$\_9$

Question Content Area

b$.$ Should Bullwinkle Company lease $($Alternative $1)$ or sell $($Alternative $2)$ the equipment?