Ferrigno Company owns equipment with a cost of $225,000 and accumulated depreciation of $81,000 that can be sold for $113,000 less a 6% sales commission. Alternatively, Ferrigno Company can lease the equipment to another company for 5 years for a total of $115,100, 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 $11,890 over the 5 years. 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 Sell Differential ---------------- Equipment Equipment Effect --------------- (Alternative 1) (Alternative 2) (Alternative 2) Revenues $ $ $ Costs Profit (loss) $ $ $ Should Ferrigno Company lease (Alternative 1) or sell (Alternative 2) the equipment?
Ferrigno Company owns equipment with a cost of $225,000 and accumulated depreciation of $81,000 that can be sold for $113,000 less a 6% sales commission. Alternatively, Ferrigno Company can lease the equipment to another company for 5 years for a total of $115,100, 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 $11,890 over the 5 years. 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 Sell Differential ---------------- Equipment Equipment Effect --------------- (Alternative 1) (Alternative 2) (Alternative 2) Revenues $ $ $ Costs Profit (loss) $ $ $ Should Ferrigno Company lease (Alternative 1) or sell (Alternative 2) the equipment?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 1BE: Lease or sell Plymouth Company owns equipment with a cost of 600,000 and accumulated depreciation of...
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Lease or Sell
Ferrigno Company owns equipment with a cost of $225,000 and
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 | Sell | Differential |
| ---------------- | Equipment | Equipment | Effect |
| --------------- | (Alternative 1) | (Alternative 2) |
(Alternative 2) |
| Revenues | $ | $ |
$ |
| Costs |
|
||
| $ | $ |
$ |
Should Ferrigno Company lease (Alternative 1) or sell (Alternative 2) the equipment?
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