McFadden Company owns equipment with a cost of $475,000 and accumulated depreciation of $280,000 that can be sold for $175,000, less a 7% sales commission. Alternatively, McFadden Company can lease the equipment for four years for a total of $180,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by McFadden Company on the equipment would total $35,500 over the four-year lease.

McFadden Company owns equipment with a cost of $475,000 and accumulated depreciation of $280,000 that can be sold for $175,000, less a 7% sales commission. Alternatively, McFadden Company can lease the equipment for four years for a total of $180,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by McFadden Company on the equipment would total $35,500 over the four-year lease.

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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Lease or sell Plymouth Company owns equipment with a cost of 600,000 and accumulated depreciation of 375,000 that can be sold for 300,000, less a 4% sales commission. Alternatively, Plymouth Company can lease the equipment for four years for a total of 320,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Plymouth Company on the equipment would total 40,000 over the four-year lease. Prepare a differential analysis on August 7 as to whether Plylmouth Company should lease (Alternative 1) or sell (Alternative 2) the equipment.
Bullwinkle Company owns a equipment with a cost of $367,200 and accumulated depreciation of $54,100 that can be sold for $277,400, less a 5% sales commission. Alternatively, Bullwinkle Company can lease the equipment to another company for three years for a total of $288,900, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Bullwinkle Company on the equipment would total $16,200 over the three years. Prepare a differential analysis on March 23 as to whether Bullwinkle Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) March 23 Lease Equipment(Alternative 1) Sell Equipment(Alternative 2) Differential Effecton Income(Alternative 2) Revenues $fill in the blank 83e0dafc0fa2fd6_1 $fill in the blank…
Bullwinkle Company owns a equipment with a cost of $365,300 and accumulated depreciation of $55,400 that can be sold for $277,400, less a 3% sales commission. Alternatively, Bullwinkle Company can lease the equipment to another company for three years for a total of $286,700, at the end of which there is no residual valoe. In addition, the repair, insurance, and property tax expense that would be incurred by Bullwinkle Company on the equipment would total $15,100 over the three years. Prepare a differential analysis on March 23 os to whether Buliwinkle Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) March 23 Differential Effect Lease Equipment Sell Equipment (Alternative 1) on Income (Alternative 2) (Alternative 2) Revenues Costs Income (Loss) Should Bullwinkle Company lease (Alternative 1) or sell…
Kincaid Company owns equipment with a cost of $364,100 and accumulated depreciation of $53,600 that can be sold for $273,400, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment for 3 years for a total of $287,600, 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 $14,900 over the 3-year lease. a. Prepare a differential analysis on October 29 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) October 29 Lease Sell Differential Line Item Description Equipment Equipment (Alternative 1) (Alternative 2) Effects (Alternative 2) < Revenues Costs 287,600 $ 273,400 $14,200 14,900 Profit (Loss) 272,700 X Feedback Check My Work Subtract the lease costs from the lease…
Yokoyama Company owns a machine with a cost of $92,000 and accumulated depreciation of $18,500 that can be sold for $66,000 less a 5% sales commission. Alternatively, Yokoyama Company can lease the machine to another company for 3 years for a total of $74,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Yokoyama Company on the machine would total $10,500 over the 3 years. Prepare a differential analysis on February 21 as to whether Yokoyama Company should lease (Alternative 1) or sell (Alternative 2) the machine. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machine (Alt. 1) or Sell Machine (Alt. 2) February 21 Differential Effect Lease Sell Machine Machine (Alternative 2) (Alternative 1) (Alternative 2) Revenues Costs Profit (loss) Should Yokoyama Company lease (Alternative 1) or sell (Alternative 2) the machine?
Duncan Company owns a machine with a cost of $308,440 and accumulated depreciation of $63,270 that can be sold for $264,500 less a 6% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of $276,490, 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 $24,440 over the three years. Required: 1. Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required. 2. Should Duncan Company lease (Alternative 1) or sell…
Ferrigno Company owns equipment with a cost of $225,000 and accumulated depreciation of $81,000 that can be sold for $113,000 less a 6% sales commission. Alternatively, Ferrigno Company can lease the equipment to another company for 5 years for a total of $115,100, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Ferrigno Company on the equipment would total $11,890 over the 5 years. Prepare a differential analysis on March 23 as to whether Ferrigno Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
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.
Plymouth Company owns equipment with a cost of $600,000 and accumulated depreciation of $375,000 that can be sold for $300,000, less a 4% sales commission. Alternatively, Plymouth Company can lease the equipment for four years for a total of $320,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Plymouth Company on the equipment would total $40,000 over the four-year lease. a. Prepare a differential analysis on August 7 as to whether Plymouth Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) August 7 LeaseEquipment(Alternative 1) SellEquipment (Alternative 2) DifferentialEffects (Alternative 2) Revenues $ $ $ Costs Profit (Loss) $ $ $ b. Should Plymouth Company lease (Alternative 1) or sell (Alternative 2) the equipment?
Keating Co. is considering disposing of equipment with a cost of $74,000 and accumulated depreciation of $51,800. Keating Co. can sell the equipment through a broker for $33,000, less a 7% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $49,000. Keating will incur repair, insurance, and property tax expenses estimated at $12,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is Oa. $4,417 Ob. $7,572 Oc. $9,465 Od. $6,310 Previous Next 7:36 PM 12/13/2020 CP DELL
Keating Co. is considering disposing of equipment with a cost of $73,000 and accumulated depreciation of $51,100. Keating Co. can sell the equipment through a broker for $32,000 less 10% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $49,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is $7,140 $15,300 $12,240 $10,200
Lease or Sell Kincaid Company owns a equipment with a cost of $366,900 and accumulated depreciation of $56,000 that can be sold for $274,700, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment to another company for three years for a total of $287,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,200 over the three years. Prepare a differential analysis on March 23 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) March 23 Differential Effect on Income (Alternative 2) Lease Equipment (Alternative 1) Sell Equipment (Alternative 2) Revenues Costs $1 Lease the equipment Sell the equipment ny lease (Alternative 1)…