Burlington Construction Company is considering selling excess machinery with a book value of $277,900 (original cost of $398,200 less accumulated depreciation of $120,300) for $274,300, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,000 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Differential Effects Lease Sell Machinery Machinery (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Profit (Loss) $ b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

Burlington Construction Company is considering selling excess machinery with a book value of $277,900 (original cost of $398,200 less accumulated depreciation of $120,300) for $274,300, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,000 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Differential Effects Lease Sell Machinery Machinery (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Profit (Loss) $ b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

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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