Assume That Penguin Co

question 126

Multiple Choice

Assume that Penguin Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Penguin Co. can sell the equipment through a broker for $25,000 less 5% commission. Alternatively, Teal Co. has offered to lease the equipment for five years for a total of $48,750. Penguin will incur repair, insurance, and property tax expenses estimated at $10,000. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is:

• A) $15,000
• B) $ 5,000
• C) $25,000
• D) $12,500

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