Delaney company is considering replacing equipment which originally cost $600,000 and which has $420,000 accumulated depreciation to date. a new machine will cost $790,000 and the old equipment can be sold for $18,000. what is the sunk cost in this situation?

Question

Business

Marco Conner

27 January, 03:45

Delaney company is considering replacing equipment which originally cost $600,000 and which has $420,000 accumulated depreciation to date. a new machine will cost $790,000 and the old equipment can be sold for $18,000. what is the sunk cost in this situation?

+5

Answers (1)

Know the Answer?

Joel Nash · Answer 1

From the given original cost and the total accumulated depreciation of the old equipment, it can be seen that the value of the equipment should still be $180,000.

salvage value = $600,000 - $420,000 = $180,000

Given that it can be sold for only $18,000, the sunken cost is $162,000.

sunken cost = $180,000 - $18,000 = $162,000