Kincaid Company owns equipment with a cost of $362,000 and accumulated depreciation of $56,000 that can be sold for $275,600, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment for three years for a total of $288,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,800 over the three year lease. a. Prepare a differential analysis on August 7 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) August 7 Lease Sell Differential Effects Equipment (Alternative 1) (Alternative 2) (Alternative 2) Equipment Revenues Costs Profit (Loss) b. Should Kincaid Company lease (Alternative 1) or sell (Alternative 2) the equipment?
Kincaid Company owns equipment with a cost of $362,000 and accumulated depreciation of $56,000 that can be sold for $275,600, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment for three years for a total of $288,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,800 over the three year lease. a. Prepare a differential analysis on August 7 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) August 7 Lease Sell Differential Effects Equipment (Alternative 1) (Alternative 2) (Alternative 2) Equipment Revenues Costs Profit (Loss) b. Should Kincaid 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...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:
9781305224414
Author:
JENNINGS
Publisher:
Cengage
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning