Differential analysis for a lease$-$or$-$sell decision

Stowe Construction Company is considering selling excess machinery with a book value of $$279,800($original cost of $$400,000$ less accumulated depreciation of $$120,200)$ for $$275,800,$ less a $5\%$ brokerage commission. Alternatively, the machinery can be leased for a total of $$286,500$ for $5$ years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $$26,300.$

a$.$ Prepare a differential analysis dated March $21$ to determine whether Stowe Construction Company should lease $($Altemative $1)$ or sell $($Alternative

the machinery. If required, use a minus sign to indicate a loss.

Differential Analysis

Lease $($Alt$,1)$ or Sell $($Alt$,2)$ Machinery March $21$

$\backslash$table$[[$Lease $($Alt$.1)$ or Sell $($Alt$,2)$ Machinery$],[$March $21]]$

Line Item Description

Machinery

Revenues

Costs

Profit $($loss$)$

Subtract the lease costs from the lease revenues, Subtract the sel machine costs from the sell machine reven ue$,$ Determine the differential effect on income of the revenues, costs, ard income $($loss$)$ by subtracting a ternative $1$ from a ternative $2$

Sulwit Assignment for Greding

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