Inman Industries is considering selling excess machinery with a book value of $279,700 (original cost of $399,400 less accumulated depreciation of $119,700) for $276,200 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $286,900 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,400. a. Prepare a differential analysis report for the lease or sell decision. INMAN INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differential revenue from alternatives: Revenue from lease v Proceeds from sale v Differential revenue from lease v Differential cost of alternatives: Repairs, Insurance, and property tax expenses from lease v Commission on sale v Differential cost of lease v Net differential gain from lease alternative v

Inman Industries is considering selling excess machinery with a book value of $279,700 (original cost of $399,400 less accumulated depreciation of $119,700) for $276,200 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $286,900 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,400. a. Prepare a differential analysis report for the lease or sell decision. INMAN INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differential revenue from alternatives: Revenue from lease v Proceeds from sale v Differential revenue from lease v Differential cost of alternatives: Repairs, Insurance, and property tax expenses from lease v Commission on sale v Differential cost of lease v Net differential gain from lease alternative v

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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Differential Analysis for a Lease or Sell Decision Granite Construction Company is considering selling excess machinery with a book value of $279,100 (original cost of $399,700 less accumulated depreciation of $120,600) for $277,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $283,700 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,200. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) November 7 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank bed17bfd1ffaf9e_1 $fill in the blank bed17bfd1ffaf9e_2…
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Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $281,600 (original cost of $402,000 less accumulated depreciation of $120,400) for $277,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $286,300 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 LeaseMachinery(Alternative 1) SellMachinery(Alternative 2) DifferentialEffects(Alternative 2) Revenues ? ? ? Costs ? ? ?…
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