Lease or Sell

Ferrigno Company owns equipment with a cost of $367,000 and accumulated depreciation of $53,000 that can be sold for $277,400, less a 4% sales commission. Alternatively, Ferrigno Company can lease the equipment to another company for three years for a total of $288,900, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Ferrigno Company on the equipment would total $15,000 over the three years.

Question Content Area

Prepare a differential analysis on March 23 as to whether Ferrigno Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) March 23

	Lease Equipment (Alternative 1)	Sell Equipment (Alternative 2)	Differential Effect (Alternative 2)
Revenues	$fill in the blank c6b2fc004f8ffd5_1	$fill in the blank c6b2fc004f8ffd5_2	$fill in the blank c6b2fc004f8ffd5_3
Costs	fill in the blank c6b2fc004f8ffd5_4	fill in the blank c6b2fc004f8ffd5_5	fill in the blank c6b2fc004f8ffd5_6
Profit (loss)	$fill in the blank c6b2fc004f8ffd5_7	$fill in the blank c6b2fc004f8ffd5_8	$fill in the blank c6b2fc004f8ffd5_9

Question Content Area

Should Ferrigno Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Lease the equipmentSell the equipment