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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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Transcribed Image Text: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
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