Astro Company owns office space with a cost of $85,500 and accumulated depreciat
ID: 2471861 • Letter: A
Question
Astro Company owns office space with a cost of $85,500 and accumulated depreciation of $54,700 that can be sold for $34,800, less a 7% broker commission. Alternatively, the office space can be leased by Astro Company for five years for a total of $36,100 at the end of which there is no residual value. In addition, repair, insurance, and property tax that would be incurred by Astro Company on the rented office space would total $5,100 over the five years. Determine the differential income or loss from the lease alternative for Astro Company. Enter the amount as a positive number.
SelectNet differential income from the lease alternativeNet differential loss from the lease alternativeItem 1
Explanation / Answer
Solution:
Statement of Differential Income or Loss Lease rent Received 36,100 Less: Additional Expense - 5,100 Net rent 31,000 Income from sale of space Sale price 34,800 Less: Book Value - $ 85,500 - $ 54,700 30,800 Less: Broher commission - 7 % 2,436 Net proceeds 1,564 Differential from lease = Net Rent - Net proceeds 29,436 Its better to lease he office space, it will increase the income by $ 29,436Related Questions
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