On August 1, Rantoul Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could use the funds to invest in $152,000 of 7% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled:

Cost of store equipment	$152,000
Life of store equipment	16 years
Estimated residual value of store equipment	$12,800
Yearly costs to operate the store, excluding depreciation of store equipment	$60,120
Yearly expected revenuesyears 18	$86,000
Yearly expected revenuesyears 916	$72,700

Required:

1.

Prepare a differential analysis as of August 1 presenting the proposed operation of the store for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). Refer to the lists of Labels and Amount Descriptions 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.

2.

Based on the results disclosed by the differential analysis, should the proposal be accepted?

3.

3. If the proposal is accepted, what would be the total estimated income from operations of the store for the 16 years?

Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:

Old Machine
Cost of machine, 10-year life	$88,820
Annual depreciation (straight-line)	9,050
Annual manufacturing costs, excluding depreciation	23,470
Annual non-manufacturing operating expenses	6,020
Annual revenue	74,030
Current estimated selling price of machine	29,610

New Machine
Purchase price of machine, six-year life	$119,515
Annual depreciation (straight-line)	20,040
Estimated annual manufacturing costs, excluding depreciation	6,805

Annual non-manufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

	Required:
1.	Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions 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.
2.	List other factors that should be considered before a final decision is reached.

Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions 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

Continue with (Alternative 1) or Replace (Alternative 2) Old Machine

April 30

1		Continue with Old Machine	Replace Old Machine	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)