Question

Casper Company owns a equipment with a cost of $361,300 and accumulated depreciation of $52,300 that can be sold for $276,800, less a 4% sales commission. Alternatively, Casper Company can lease the equipment to another company for three years for a total of $286,900, 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 $15,100 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 (Alternative 1)	Sell Equipment (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs
Income (Loss)	$	$	$

Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Answer 1

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 (Alternative 1)	Sell Equipment (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$286900	$276800	-10100
Costs	-15100	-11072	4028
Income (Loss)	$271800	$265728	-6072

Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Company should lease the equipment