ewor 13 Lease or Sell Toccoa Company owns equipment with a cost of $1,200,000 and accumulated depreciation of $990,000 that can be sold for $200,000, less a 5% sales commission. Alternatively, Toccoa Company can lease the equipment for 3 years for a total of $225,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Toccoa Company on the equipment would total $45,000 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Toccoa Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) 57 October 29 Line Item Description Lease Equipment Sell Equipment Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs $225,000 X $ 45,000 Profit (Loss) Feedback +9 +7

ewor 13 Lease or Sell Toccoa Company owns equipment with a cost of $1,200,000 and accumulated depreciation of $990,000 that can be sold for $200,000, less a 5% sales commission. Alternatively, Toccoa Company can lease the equipment for 3 years for a total of $225,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Toccoa Company on the equipment would total $45,000 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Toccoa Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) 57 October 29 Line Item Description Lease Equipment Sell Equipment Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs $225,000 X $ 45,000 Profit (Loss) Feedback +9 +7

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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Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the purchase of the printer impacts not only depreciation expense each year but also the assets book value. What amount will be recorded as depreciation expense each year, and what will the book value be at the end of each year after depreciation is recorded?
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.
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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…
Lease 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. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) March 23 ---------------- Lease Sell Differential ---------------- Equipment Equipment Effect --------------- (Alternative 1) (Alternative 2) (Alternative 2) Revenues $ $ $ Costs…
Lease 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. Differential Analysis Lease Equipement (Alt. 1) or Sell Equipment (Alt. 2) March 23 Differential Lease Sell Effect Equipment Equipment (Alternative 2) (Alternative 1) (Alternative 2) Revenues $ $ $ Costs Profit (loss) $ $ $…
COL Inc. can either purchase an equipment for $650,000 or lease it from LEN Inc. by making 12 annual lease payments (paid at the beginning of the year) of $89,600. The equipment has CCA rate of 20% and will have salvage value of $56,000 at the end of year 12. Assume this asset is the only asset in the asset class for both companies. LEN’s borrowing cost is 11% which is 1% lower than COL’s. COL and LEN have tax rate of 15% and 40% respectively. a) Calculate the NPV of leasing for COL. b) Calculate the NPV of leasing for LEN. c) Calculate the maximum and minimum annual lease payment acceptable to COL and LEN respectively.
Lease or sell Plymouth Company owns equipment with a cost of $500,000 and accumulated depreciation of $330,000 that can be sold for $290,000, less a 3% sales commission. Alternatively, Plymouth Company can lease the equipment for four years for a total of $330,000, 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 $43,000 over the four-year lease. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Prepare a differential analysis on August 7 as to whether Plymouth Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Use a minus sign to indicate costs or negative differential effect on income.
Lease or sell Plymouth Company owns equipment with a cost of $550,000 and accumulated depreciation of $350,000 that can be sold for $330,000, less a 4% sales commission. Alternatively, Plymouth Company can lease the equipment for four years for a total of $400,000, 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 $35,000 over the four-year lease. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Prepare a differential analysis on August 7 as to whether Plymouth Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Use a minus sign to indicate costs or negative differential effect on income. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Equipment August 7 Lease…
Lease or sell Plymouth Company owns equipment with a cost of $600,000 andaccumulated depreciation of $375,000 that can be sold for $300,000, lessa 4% sales commission. Alternatively, Plymouth Company can lease theequipment for four years for a total of $320,000, at the end of which thereis no residual value. In addition, the repair, insurance, and property taxexpense that would be incurred by Plymouth Company on theequipment would total $40.000 over the four-year-lease. Prepare adiffrential analysis on August 7 as to whether Plymouth Companyshould lease (Alternative 1) or sell (Alternative 2) the equipment.
Lease or Sell Casper Company owns equipment with a cost of $366,800 and accumulated depreciation of $54,900 that can be sold for $277,500, less a 5% sales commission. Alternatively, Casper Company can lease the equipment for three years for a total of $288,100, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Casper Company on the equipment would total $15,800 over the three year lease. a. Prepare a differential analysis on February 18, as to whether Casper 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 Effecton Income(Alternative 2) Revenues Costs Income (Loss) b. Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?