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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Lease or Sell Decision
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
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Transcribed Image Text:Lease or Sell Decision 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 Sign out • O 12:13 00
Expert Solution
Working:

Commission on sale = Proceeds from sale x % commisson

= $276,200 x 6%

= $16,572

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