Question: Jerrod Company owns a machine with a cost of
Jerrod Company owns a machine with a cost of $ 305,000 and accumulated depreciation of $ 45,000 that can be sold for $ 231,000, less a 5% sales commission. Alternatively, the machine can be leased by Jerrod Company for three years for a total of $ 243,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Jerrod Company on the machine would total $ 16,900 over the three years. Prepare a differential analysis on January 12, 2014, as to whether Jerrod Company should lease (Alternative 1) or sell (Alternative 2) the machine.
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