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2. DAmato Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,831. The freight and installation costs for the equipment are $554. If purchased, annual repairs and maintenance are estimated to be $415 per year over the four-year useful life of the equipment. Alternatively, DAmato can lease the equipment from a domestic supplier for $1,745 per year for four years, with no additional costs.

Required:

A.

Prepare a differential analysis dated December 11 to determine whether DAmato 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.)

A.

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)
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