Hadley Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $290,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Hadley on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission. Required: Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold. Differential Analysis Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold. Differential Analysis Proposal to Lease (Alternative 1) or Sell Equipment (Alternative 2) June 15 1 Lease Equipment (Alternative 1) Sell Equipment (Alternative 2) Differential Effect on Income (Alternative 2) 2 Revenues 3 Costs
Hadley Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $290,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Hadley on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission. Required: Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold. Differential Analysis Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold. Differential Analysis Proposal to Lease (Alternative 1) or Sell Equipment (Alternative 2) June 15 1 Lease Equipment (Alternative 1) Sell Equipment (Alternative 2) Differential Effect on Income (Alternative 2) 2 Revenues 3 Costs
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...
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Hadley Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $290,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Hadley on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission.
Required:
Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold. |
Differential Analysis
Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold.
Differential Analysis
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Proposal to Lease (Alternative 1) or Sell Equipment (Alternative 2)
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June 15
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1
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Lease Equipment (Alternative 1)
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Sell Equipment (Alternative 2)
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Differential Effect on Income (Alternative 2)
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2
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Revenues
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3
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Costs
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4
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Income (loss)
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