Granite Construction Company is considering selling excess machinery with a book value of $279,100 (original cost of $399,700 less accumulated depreciation of $120,600) for $277,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $283,700 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,200. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) November 7 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank bed17bfd1ffaf9e_1 $fill in the blank bed17bfd1ffaf9e_2 $fill in the blank bed17bfd1ffaf9e_3 Costs fill in the blank bed17bfd1ffaf9e_4 fill in the blank bed17bfd1ffaf9e_5 fill in the blank bed17bfd1ffaf9e_6 Income (Loss) $fill in the blank bed17bfd1ffaf9e_7 $fill in the blank bed17bfd1ffaf9e_8 $fill in the blank bed17bfd1ffaf9e_9 b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

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 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...

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Differential Analysis for a Lease or Sell Decision

Granite Construction Company is considering selling excess machinery with a book value of $279,100 (original cost of $399,700 less accumulated depreciation of $120,600) for $277,600, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $283,700 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,200.

a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery.

Differential Analysis
Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2)
November 7
	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank bed17bfd1ffaf9e_1	$fill in the blank bed17bfd1ffaf9e_2	$fill in the blank bed17bfd1ffaf9e_3
Costs	fill in the blank bed17bfd1ffaf9e_4	fill in the blank bed17bfd1ffaf9e_5	fill in the blank bed17bfd1ffaf9e_6
Income (Loss)	$fill in the blank bed17bfd1ffaf9e_7	$fill in the blank bed17bfd1ffaf9e_8	$fill in the blank bed17bfd1ffaf9e_9

b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

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