Matrix Construction Company is considering selling excess machinery with a book value of $287,900 (original cost of $410,500 less accumulated depreciation of $122,600) for $223,000 less a 6% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $217,620 for five years, after which it is expected to have no residual value. During the period of the lease, Matrix Construction Companys costs of repairs, insurance, and property tax expenses are expected to be $16,660.

Required:

A.

Prepare a differential analysis, dated May 25 to determine whether Matrix should lease (Alternative 1) or sell (Alternative 2) the machinery. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter 0. A colon (:) will automatically appear if required.

B.

On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.

A. Prepare a differential analysis, dated May 25 to determine whether Matrix should lease (Alternative 1) or sell (Alternative 2) the machinery. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter 0. A colon (:) will automatically appear if required.

Differential Analysis

Lease Machinery (Alternative 1) or Sell Machinery (Alternative 2)

May 25

1		Lease Machinery	Sell Machinery	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5

B. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.

- Sell the machinery

- Lease the machinery

The net ______ from selling is $____?.