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22 February, 13:49

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?

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  1. 22 February, 17:30
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    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
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