Max, IncCan Sell a Large Piece of Machinery for $90,000

question 22

Multiple Choice

Max, Inc.can sell a large piece of machinery for $90,000.The machinery originally cost $240,000 and has accumulated depreciation of $130,000.Max will have to pay a 5% sales commission on the sale.Rather than sell, Max is considering leasing the machine.It can be leased for 4 years for $24,000 per year.Max has estimated future operating expenses to be $3,000 per year, and Max will be responsible for those expenses.Which of the following options most accurately describes the analysis and decision for Max?

• A) Lease - because differential revenues are $6,000 if Max leases rather than sells
• B) Lease - because Max will lose $20,000 if it sells the equipment for less than its $110,000 book value
• C) Sell - because differential income of selling rather than leasing is $6,000
• D) Sell - because differential income is $1,500 if Max sells rather than leases

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Definitions:

Oral Stage

The first stage in Freud's theory of psychosexual development, occurring from birth to about 18 months, where the infant's pleasure centers are the mouth.

Overeating

The consumption of an excess amount of food beyond what is necessary for energy and nutrition.

Psychosexual Stages

Psychosexual stages are a core concept in Freudian psychology that outlines five stages of sexual development from infancy to adulthood, each characterized by the erogenous zone that is the source of a child's psychosexual energy.

Phallic Stage

A phase in Freud's psychosexual development theory, occurring from ages 3 to 6, where children's libido is centered on their genitalia and they develop sexual identification with the same-sex parent.