Raven Company is considering replacing equipment which originally cost $500,000 and which has $420,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in this situation?
A) $370,000
B) $790,000
C) $80,000
D) $290,000

Question

Quizplus · Accepted Answer

Sunk cost refers to the original cost of the equipment minus its accumulated depreciation, which is $500,000 - $420,000 = $80,000.

Raven Company Is Considering Replacing Equipment Which Originally Cost $500,000