Question

D’Amato Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $4,024. The freight and installation costs for the equipment are $460. If purchased, annual repairs and maintenance are estimated to be $413 per year over the four-year useful life of the equipment. Alternatively, D’Amato can lease the equipment from a domestic supplier for $1,769 per year for four years, with no additional costs.

	Required:
A.	Prepare a differential analysis dated December 11 to determine whether D’Amato should lease (Alternative 1) or purchase (Alternative 2) the equipment. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. (Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.)
B.	Determine whether the D’Amato should lease (Alternative 1) or purchase (Alternative 2) the equ A. Prepare a differential analysis dated December 11 to determine whether D’Amato should lease (Alternative 1) or purchase (Alternative 2) the equipment. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtractive or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner. Score: 41/125 Differential Analysis Lease Equipment (Alternative 1) or Buy Equipment (Alternative 2) December 11 1 Lease Equipment Buy Equipment Differential Effect on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 3 ✔ 4 ✔ 5 ✔ 6 ✔ 7 ✔ 8 ✔ 9 ✔ 10 ✔

Answer 1

Differential Analysis
Lease Equipment (Alternative 1) or Buy Equipment (Alternative 2)
11-Dec
1		Lease Equipment	Buy Equipment	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3	Purchase Cost	0	4024	-4024
4	Freight and Installation charges	0	460	-460
5	Reapis and Maintenance cost	0	1652	-1652
6	Lease Rent	7076	0	7076
7	Total Cost	7076	6136	940
8	✔
9	✔
10	✔

Should Buy