Casper Company owns equipment with a cost of $366,800 and accumulated depreciation of $54,900 that can be sold for $277,500, less a 5% sales commission. Alternatively, Casper Company can lease the equipment for three years for a total of $288,100, 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 $15,800 over the three year lease. a. Prepare a differential analysis on February 18, as to whether Casper Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Equipment February 18 Lease Equipment (Alternative 1) Sell Equipment (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs Income (Loss) b. Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?
Lease or Sell
Casper Company owns equipment with a cost of $366,800 and
a. Prepare a differential analysis on February 18, as to whether Casper Company should lease (Alternative 1) or sell (Alternative 2) the equipment.
| Differential Analysis | |||
| Lease (Alt. 1) or Sell (Alt. 2) Equipment | |||
| February 18 | |||
| Lease Equipment (Alternative 1) |
Sell Equipment (Alternative 2) |
Differential Effect on Income (Alternative 2) |
|
| Revenues | |||
| Costs | |||
| Income (Loss) |
b. Should Casper Company lease (Alternative 1) or sell (Alternative 2) the equipment?
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