Inman Construction Company is considering selling excess machinery with a book value of $282,400 (original cost of $401,900 less accumulated depreciation of $119,500) for $277,700, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $287,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,800. a. Prepare a differential analysis, dated May 25 to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank 0e9403fe1fc606b_1 $fill in the blank 0e9403fe1fc606b_2 $fill in the blank 0e9403fe1fc606b_3 Costs fill in the blank 0e9403fe1fc606b_4 fill in the blank 0e9403fe1fc606b_5 fill in the blank 0e9403fe1fc606b_6 Income (Loss) $fill in the blank 0e9403fe1fc606b_7 $fill in the blank 0e9403fe1fc606b_8 $fill in the blank 0e9403fe1fc606b_9 b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The net from selling is $fill in the blank b976d4ff802b009_3.

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 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...

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Inman Construction Company is considering selling excess machinery with a book value of $282,400 (original cost of $401,900 less accumulated depreciation of $119,500) for $277,700, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $287,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,800.

a. Prepare a differential analysis, dated May 25 to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2)
May 25
	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 0e9403fe1fc606b_1	$fill in the blank 0e9403fe1fc606b_2	$fill in the blank 0e9403fe1fc606b_3
Costs	fill in the blank 0e9403fe1fc606b_4	fill in the blank 0e9403fe1fc606b_5	fill in the blank 0e9403fe1fc606b_6
Income (Loss)	$fill in the blank 0e9403fe1fc606b_7	$fill in the blank 0e9403fe1fc606b_8	$fill in the blank 0e9403fe1fc606b_9

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

The net from selling is $fill in the blank b976d4ff802b009_3.

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