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Spencer Company Is Contemplating the Replacement of an Old Machine

Question 21

Multiple Choice

Spencer Company is contemplating the replacement of an old machine with a new one. The following information has been gathered:  Old Machine New Machine  Price $390,000$530,000 Accumulated Depreciation 170,0000 -  Remaining useful life 6 years 0 -  Useful life 010 years  Annual operating costs $167,000$151.500\begin{array}{lrr}&\text { Old Machine}&\text { New Machine }\\\text { Price } & \$ 390,000 & \$ 530,000 \\\text { Accumulated Depreciation } & 170,000 & -0 \text { - } \\\text { Remaining useful life } & 6 \text { years } & -0 \text { - } \\\text { Useful life } & -0- & 10 \text { years } \\\text { Annual operating costs } & \$ 167,000 & \$ 151.500\end{array} If the old machine is replaced it can be sold for $120000. Which of the following amounts is a sunk cost?


A) $167000
B) $151500
C) $220000
D) $170000

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