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 (Alternative 2) the machine? Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine.
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 (Alternative 2) the machine? Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine.
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 44P
Related questions
Question
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 (Alternative 2) the machine? |
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.
|
Differential Analysis
|
|
Lease Machine (Alternative 1) or Sell Machine (Alternative 2)
|
|
February 21
|
|
1
|
|
Lease Machine
|
Sell Machine
|
Differential Effect on Income
|
|
2
|
|
(Alternative 1)
|
(Alternative 2)
|
(Alternative 2)
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
Should Duncan Company lease (Alternative 1) or sell (Alternative 2) the machine?
The company is indifferent since the result is the same regardless of which alternative is chosen.
Sell the machine
Lease the machine
Expert Solution
Step 1
Incremental Analysis: Incremental 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.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you