Lease or Sell Decision

Orwell Industries is considering selling excess machinery with a book value of $300,000 (original cost of $950,000 less accumulated depreciation of $650,000) for $145,000 less a 5% brokerage commission. Alternatively, the machinery can be leased out for a total of $215,000 for five years, after which it is expected to have no residual value. During the period of the lease, Orwell Industries' costs of repairs, insurance, and property tax expenses are expected to be $80,000.

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

ORWELL INDUSTRIES
Proposal to Lease or Sell Machinery
Differential Analysis Report
Differential revenue from alternatives:
Revenue from lease	$
Proceeds from sale
Differential revenue from lease		$
Differential cost of alternatives:
Repairs, insurance, and property tax expenses from lease	$
Commission on sale
Differential cost of lease
Net differential loss from lease alternative		$