27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Lease or sell

Timberlake Company owns equipment with a cost of $165,000 and accumulated depreciation of $60,000 that can be sold for $82,000 less a 6% sales commission. Alternatively, Timberlake Company can lease the equipment to another company for five years for a total of $84,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Timberlake Company on the equipment would total $7,950 over the five years. Prepare a differential analysis on March 23 as to whether Timberlake Company should lease (Alternative 1) or sell (Alternative 2) the equipment.

To determine

Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business.

To Determine: Whether Company T should sell or lease the machine.


Company T has two alternatives to either lease at $84,600 or to sell a machine for $82,000 with a 6% sales commission. The company would generate the revenue of $76,650 from leasing after providing $7,950 for  repair, insurance and tax or the Company T could get $77,080 after selling the machine. This clearly shows an increase in the income by $430 if the Company T sells the machine instead of leasing it.

Working Note:

Calculate the cost to sell the machine...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Does interest rate parity imply that interest rates are the same in all countries?

Fundamentals of Financial Management (MindTap Course List)

Why do economists make assumptions?

Principles of Microeconomics (MindTap Course List)

What are the three major objectives of budgeting?

Financial And Managerial Accounting

What is discretionary reporting?

Accounting Information Systems

Describe business marketing


Indicate whether the following instruments are examples of money market or capital market securities. a. U.S. T...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)