Lease or Sell Astro Company owns a machine with a cost of $362,800 and accumulat

Question

Lease or Sell Astro Company owns a machine with a cost of $362,800 and accumulated depreciation of $55,100 that can be sold for $275,300, less a 4% sales commission. Alternatively, the machine can be leased by Astro Company for three years for a total of $287,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the machine would total $16,900 over the three years. Prepare a differential analysis on January 12, as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the machine. Aalysi Lease Machine (Alt. 1) or Sell Machine (Alt. 2) January 12 Lease Machine (Alternative 1) Sell Machine (Alternative 2) Differential Effect on Income (Alternative 2) Income (Loss)

Explanation / Answer

Lease machine Sell machine Differential effect on income Revenues 287600 275300 12300 Costs -16900 -11012 -5888 Income(loss) 270700 264288 6412

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