Paul's Delivery Service Is Considering Selling One of Its Smaller

question 74

Multiple Choice

Paul's Delivery Service is considering selling one of its smaller trucks that is no longer needed in the business.The truck originally cost $23,000 and has accumulated depreciation of $10,000.The truck can be sold for $14,000.Another company is interested in leasing the truck.It will pay $4,800 per year for three years.Paul's Delivery Service will continue to pay the taxes and license fees for the truck,but all other expenses will be paid by the lessee.Management assumes the expenses for the taxes and license will be $300 per year.Which of the following statements is correct?

• A)Paul's Delivery Service should sell the truck because the differential loss from leasing is $500.
• B)Paul's Delivery Service should lease the truck because the differential income from leasing is $12,200.
• C)Paul's Delivery Service should lease the truck because the differential income from leasing is $300.
• D)Paul's Delivery Service is indifferent as to whether the company should lease or sell the truck because there is no differential income or loss between the alternatives.

---

Definitions:

Economic Exchange

The process of trading goods, services, or both, involving the transfer of money or other valuables between parties.

Reciprocity Norm

A social norm that suggests individuals should repay, in kind, what another has provided or done for them.

Role Transference

A psychological phenomenon where an individual assumes the attitudes, behaviors, or roles of another group or person, often seen in marketing when consumers identify with brand personalities.

Consubstantiation

The concept of acknowledging a shared essence among entities while still maintaining their distinct identities.