Question
Lease or Sell Kincaid Company owns equipment with a cost of $361,900 and accumulated depreciation of...
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?
Homework Answers
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