Duncan Company owns a machine with a cost of $75,000 and accumulated depreciation of $15,000 that can be sold for $54,000 less a 5% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of $60,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Duncan Company on the machine would total $8,500 over the three years. Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine.
Duncan Company owns a machine with a cost of $75,000 and accumulated depreciation of $15,000 that can be sold for $54,000 less a 5% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of $60,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Duncan Company on the machine would total $8,500 over the three years. Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine.
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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