Prepare a differential analysis report: Devoe Construction
machinery with a book value of $280,000 (original cost of $400,000 less
accumulated depreciation of $120,000) for $292,000, less a 5% brokerage commission.
Alternatively, the machinery can be leased for a total of $312,000 fr five
years, after which it is expected to have no residual value. During this period
of the lease, Devoe Construction Company’s cost of repairs, insurance, and
property tax expenses are expected to be $36,000.
a. Prepare a differential analysis report, dated January 3,
2010, for the lease or sell decision.
b. On the basis of the data presented, would it be advisable
to lease or sell the machinery? Explain
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