Please answer it in an organized fashion, it makes it easier to understand. Than
ID: 2538581 • Letter: P
Question
Please answer it in an organized fashion, it makes it easier to understand. Thank you
Differential Analysis for a Lease or Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $280,300 (original cost of $399,500 less accumulated depreciation of $119,200) for $274,700, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $284,700 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 $26,000. 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 (Alternative1) Sell Machinery (Alternative2) (Alternative 2) Costs Income (Loss) $ b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The net in"" selling isExplanation / Answer
Part A)
The differential analysis is prepared as below:
____
Part 2)
It would be advisable to sell the machinery.
The net gain from selling is $2,265.
Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May-25 Lease Machinery (Alternative 1) [A] Sell Machinery (Alternative 2) [B] Differential Effect on Income (Alternative 2) [B-A] Revenues $284,700 $274,700 -$10,000 Costs -26,000 -13,735 (274,700*5%) 12,265 Income (Loss) $258,700 $260,965 $2,265