Asked by
Bryn-Taylor (Bryn) Kedra
on Dec 16, 2024
Verified
Keating Co. is considering disposing of equipment with a cost of $50,000 and accumulated depreciation of $40,000. Keating Co. can sell the equipment through a broker for $25,000, less a 5% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,750. Keating will incur repair, insurance, and property tax expenses estimated at $8,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is
A) $17,000
B) $7,000
C) $27,000
D) $14,500
Broker Commission
A fee paid to a broker for executing a transaction. It is typically calculated as a percentage of the transaction value.
Differential Income
The increase or decrease in income resulting from a change in business decisions or operations.
- Determine the financial impact of replacing or disposing of equipment.
Verified Answer
EC
Learning Objectives
- Determine the financial impact of replacing or disposing of equipment.