Question

Lease or Sell Casper Company owns a equipment with a cost of $367,800 and accumulated depreciation of $52,800 that can be sold for $276,900, less a 4% sales commission. Alternatively, Casper Company can lease the equipment to another company for three years for a total of $288,500, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Casper Company on the equipment would total $15,400 over the three years. Prepare a differential analysis on March 23 as to whether Casper 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 Lease Equipment Sell Equipment Differential Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Income (Loss) $ Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Answer 1

Differential Analysis Lease Equipment (Alt 1) or Sell Equipment (Alt.2) Mar-23 lease Differential Equipement Effect on (Alternative Sell Equipement Income (Alternative 2) (Alternative 2) 288500 276900 11600 15400 11076 4324 273100 265824 7276 1) Revenue Costs income (Loss) Casper company should Lease the equipement as it will provide more income of $7276 than selling it.