Carillion Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $310,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Carillion Company on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission.
Prepare a differential analysis report, dated June 15 of the current year, on whether the equipment should be leased or sold.

Question

Quizplus · Accepted Answer

The Answer of Carillion Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $310,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Carillion Company on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission.
Prepare a differential analysis report, dated June 15 of the current year, on whether the equipment should be leased or sold.

Carillion Company Is Considering the Disposal of Equipment That Is