Keating Co

Multiple Choice

Keating Co.is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date.Keating Co.can sell the equipment through a broker for $25,000 less 5% commission.Alternatively,Gunner Co.has offered to lease the equipment for five years for a total of $48,750.Keating will incur repair,insurance,and property tax expenses estimated at $8,000 over the five-year period.At lease-end,the equipment is expected to have no residual value.The net differential income from the lease alternative is

A) $17,000
B) $7,000
C) $27,000
D) $14,500