Toccoa Company owns equipment with a cost of $600,000 and accumulated depreciation of $340,000 that can...
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Toccoa Company owns equipment with a cost of $600,000 and accumulated depreciation of $340,000 that can be sold for $290,000, less a 4% sales commission. Alternatively, Toccoa 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 Toccoa Company on the equipment would total $40,000 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. X Open spreadsheet Prepare a differential analysis on October 29 as to whether Toccoa 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 Equipment (Alt. 1) or Sell Equipment (Alt. 2) Revenues Costs Lease Equipment October 29 Sell Equipment Differential Effect on (Alternative 1) (Alternative 2) Income (Alternative 2) $310,000 $ 290,000 -37,000 x -14,500 x $ -20,000 22,500 x 2,500 x Profit (Loss) $273,000 x $ 275,500 Should Toccoa Company lease (Alternative 1) or sell (Alternative 2) the equipment? Sell the equipment Feedback Check My Work X Subtract the lease costs from the lease revenues. Subtract the sell equipment costs from the sell equipment revenues. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. Compare the differential revenues and differential costs of leasing vs. selling. Which one has the greatest positive differential effect on income? Toccoa Company owns equipment with a cost of $600,000 and accumulated depreciation of $340,000 that can be sold for $290,000, less a 4% sales commission. Alternatively, Toccoa 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 Toccoa Company on the equipment would total $40,000 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. X Open spreadsheet Prepare a differential analysis on October 29 as to whether Toccoa 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 Equipment (Alt. 1) or Sell Equipment (Alt. 2) Revenues Costs Lease Equipment October 29 Sell Equipment Differential Effect on (Alternative 1) (Alternative 2) Income (Alternative 2) $310,000 $ 290,000 -37,000 x -14,500 x $ -20,000 22,500 x 2,500 x Profit (Loss) $273,000 x $ 275,500 Should Toccoa Company lease (Alternative 1) or sell (Alternative 2) the equipment? Sell the equipment Feedback Check My Work X Subtract the lease costs from the lease revenues. Subtract the sell equipment costs from the sell equipment revenues. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. Compare the differential revenues and differential costs of leasing vs. selling. Which one has the greatest positive differential effect on income?
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Related Book For
Financial And Managerial Accounting
ISBN: 9780357714041
16th Edition
Authors: Carl S. Warren, Jefferson P. Jones, William Tayler
Posted Date:
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