Lease or SellKincaid Company owns a equipment with a cost of $366,900 and accumulated depreciation of $56,000 that can be sold for $274,700, less a 4% salescommission. Alternatively, Kincaid Company can lease the equipment to another company for three years for a total of $287,000, at the end of which there is noresidual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $15,200over the three years.Prepare a differential analysis on March 23 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes inwhich you must enter subtracted or negative numbers use a minus sign.Differential AnalysisLease Equipment (Alt. 1) or Sell Equipment (Alt. 2)March 23Differential Effecton Income(Alternative 2)Lease Equipment(Alternative 1)Sell Equipment(Alternative 2)RevenuesCosts$1Lease the equipmentSell the equipmentny lease (Alternative 1) or sell (Alternative 2) the equipment?

Differential Analysis: Differential analysis refers to the analysis of differential revenue that…

Answered: Lease or Sell Kincaid Company owns a…

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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Bullwinkle Company owns a equipment with a cost of $365,300 and accumulated depreciation of $55,400 that can be sold for $277,400, less a 3% sales commission. Alternatively, Bullwinkle Company can lease the equipment to another company for three years for a total of $286,700, at the end of which there is no residual valoe. In addition, the repair, insurance, and property tax expense that would be incurred by Bullwinkle Company on the equipment would total $15,100 over the three years. Prepare a differential analysis on March 23 os to whether Buliwinkle Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) March 23 Differential Effect Lease Equipment Sell Equipment (Alternative 1) on Income (Alternative 2) (Alternative 2) Revenues Costs Income (Loss) Should Bullwinkle Company lease (Alternative 1) or sell…
At the beginning of current year, Jimbie Company, as lessor, leased an equipment for ten years at an annual rental of P 1,200,000, payable by Buggy Company, the lessee, at the beginning of each year. The lease is appropriately accounted for as finance lease. The equipment had a cost of P 8,400,000 with an estimated life of 12 years and no residual value. The straight line depreciation is used. The implicit rate is 9%. What amount of interest income should be reported in the income statement for the current year? Show your solution.
Kincaid Company owns equipment with a cost of $364,100 and accumulated depreciation of $53,600 that can be sold for $273,400, less a 4% sales commission. Alternatively, Kincaid Company can lease the equipment for 3 years for a total of $287,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Kincaid Company on the equipment would total $14,900 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Kincaid Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) October 29 Lease Sell Differential Line Item Description Equipment Equipment (Alternative 1) (Alternative 2) Effects (Alternative 2) < Revenues Costs 287,600 $ 273,400 $14,200 14,900 Profit (Loss) 272,700 X Feedback Check My Work Subtract the lease costs from the lease…
ABC Company has outstanding P 20,500,000 (20,000,000 face value and 500,000 interest payable) note payable to DEF Company on December 31,2020 which is also the due date of this liability.Because of financial difficulties, ABC Company negotiates with DEF to exchange a building with a book value of P 18,000,000. The fair value of this asset base on the market is P 19,750,000.How much is the gain on debt restructuring?
Blossom, Inc. leases a piece of equipment to Wildhorse Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $8,880 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $48,000, a book value of $43,000, and a useful life of 8 years. At the end of the lease term, Blossom expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Blossom wants to earn a 5% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically
Plymouth Company owns equipment with a cost of $600,000 and accumulated depreciation of $375,000 that can be sold for $300,000, less a 4% sales commission. Alternatively, Plymouth Company can lease the equipment for four years for a total of $320,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Plymouth Company on the equipment would total $40,000 over the four-year lease. a. Prepare a differential analysis on August 7 as to whether Plymouth Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) August 7 LeaseEquipment(Alternative 1) SellEquipment (Alternative 2) DifferentialEffects (Alternative 2) Revenues $ $ $ Costs Profit (Loss) $ $ $ b. Should Plymouth Company lease (Alternative 1) or sell (Alternative 2) the equipment?
COL Inc. can either purchase an equipment for $650,000 or lease it from LEN Inc. by making 12 annual lease payments (paid at the beginning of the year) of $89,600. The equipment has CCA rate of 20% and will have salvage value of $56,000 at the end of year 12. Assume this asset is the only asset in the asset class for both companies. LEN’s borrowing cost is 11% which is 1% lower than COL’s. COL and LEN have tax rate of 15% and 40% respectively. a) Calculate the NPV of leasing for COL. b) Calculate the NPV of leasing for LEN. c) Calculate the maximum and minimum annual lease payment acceptable to COL and LEN respectively.
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Yokoyama Company owns a machine with a cost of $92,000 and accumulated depreciation of $18,500 that can be sold for $66,000 less a 5% sales commission. Alternatively, Yokoyama Company can lease the machine to another company for 3 years for a total of $74,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Yokoyama Company on the machine would total $10,500 over the 3 years. Prepare a differential analysis on February 21 as to whether Yokoyama Company should lease (Alternative 1) or sell (Alternative 2) the machine. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machine (Alt. 1) or Sell Machine (Alt. 2) February 21 Differential Effect Lease Sell Machine Machine (Alternative 2) (Alternative 1) (Alternative 2) Revenues Costs Profit (loss) Should Yokoyama Company lease (Alternative 1) or sell (Alternative 2) the machine?

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