Sure-Bilt Construction Company is considering selling excess machinery with a book value of $279,300 (original cost of $399,800 less accumulated depreciation of $120,500) for $277,000, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $286,900 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,300. Prepare a differential analysis, dated January 3, 2012, to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery. Lease Equipment (Alternative 1)
1) Revenues: $285000
2) Costs
3) Income (Loss)
Sell Equipment (Alternative 2)
1) Revenues: $276000
2) Costs
3) Income (Loss)
Differential Effect on Income (Alternative 3)
1) Revenues: $9000
2) Costs
3) Income (Loss)