Lease or Sell

Kincaid Company owns equipment with a cost of $363,300 and accumulated depreciation of $56,600 that can be sold for $275,700, less a 3% sales commission. Alternatively, Kincaid Company can lease the equipment for three years for a total of $288,500, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $16,500 over the three year lease.

a. Prepare a differential analysis on August 7 as to whether Kincaid 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	$	$	$
Costs
Profit (Loss)	$	$	$