Question

Lease or Sell

Kincaid Company owns equipment with a cost of $361,900 and accumulated depreciation of $52,100 that can be sold for $273,600, less a 3% sales commission. Alternatively, Kincaid Company can lease the equipment for three years for a total of $287,100, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,500 over the three year lease.

a. Prepare a differential analysis on February 18, as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment.

Differential Analysis
Lease (Alt. 1) or Sell (Alt. 2) Equipment
February 18
	Lease Equipment (Alternative 1)	Sell Equipment (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank ba28ae06807202f_1	$fill in the blank ba28ae06807202f_2	$fill in the blank ba28ae06807202f_3
Costs	fill in the blank ba28ae06807202f_4	fill in the blank ba28ae06807202f_5	fill in the blank ba28ae06807202f_6
Income (Loss)	$fill in the blank ba28ae06807202f_7	$fill in the blank ba28ae06807202f_8	$fill in the blank ba28ae06807202f_9

b. Should Kincaid Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Answer 1