Delaney Company Is Considering Replacing Equipment That Originally Cost $600,000

question 13

Multiple Choice

Delaney Company is considering replacing equipment that originally cost $600,000 and that has $420,000 accumulated depreciation to date. A new machine will cost $790,000, and the old equipment can be sold for $8,000. What is the sunk cost in this situation?

• A) $172,000
• B) $180,000
• C) $188,000
• D) $290,000

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Definitions:

Guarantor

An individual or entity that agrees to be responsible for another's debt or performance under a contract, should the primary party fail to meet its obligations.

Principal Debtor

The main individual or entity responsible for repaying a debt or obligation.

Creditor

An individual, organization, or entity that lends money or extends credit to another party, expecting repayment.

Verbal Agreement

An agreement made through spoken words and not formally recorded in writing, yet is legally binding.