Assume That Marlow Co

Multiple Choice

Assume that Marlow Co. is considering disposing of equipment that cost $200,000 and has $160,000 of accumulated depreciation to date. Marlow Co. can sell the equipment through a broker for $100,000 less 5% commission. Alternatively, Minton Co. has offered to lease the equipment for five years for a total of $195,000. Marlow will incur repair, insurance, and property tax expenses estimated at $40,000. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is:

A) $55,000.
B) $20,000.
C) $100,000.
D) $60,000.