Question

The Porter Beverage Factory owns a building for its operations. Porter uses only half of the building and is considering two options for the unused space. The Popcorn Store would like to purchase the half of the building that is not being used for $365,000. A 6% commission would have to be paid at the time of purchase. The Porter Beverage would like to lease the half of the building for the next 5 years at $96,400 each year. Porter would have to continue paying $23,500 of property taxes each year and $4,500 of yearly insurance on the property, according to the proposed lease agreement.

Determine the differential income or loss from the lease alternative. Enter a loss as a negative number: $___ LOSS

Answer 1

ANSWER:

  

Particulars	Sales Alternative	Lease Alternative	Differential income
SALES	$365,000	$0	($365,000)
Less:Commission@6%	$21,900	$0	$21,900
Net sales	$343,100	$0	$343,100
Lease payment	$0	$482,000	$482,000
Insurance	$0	$22,500	$22,500
Less:property agreement		$117,500	$117,500
Total	$343,100	$387,000	$43900
Incremental income is$43,900 (387,000 - $343,100)

_____________________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU**************