Which of the Following Is an Example of a Sunk

question 138

Multiple Choice

Which of the following is an example of a sunk cost?

• A) after you start watching a movie, the $8 you paid for the ticket
• B) the $100,000 a shoe factory will pay for the leather it uses to make shoes
• C) the electricity purchased by a horse breeder
• D) the $10 being spent on gasoline purchased by a traveling salesperson
• E) the $6,000 Tommy's insurance company pays him after an accident.

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Definitions:

Personal-use Asset

An asset primarily used for personal enjoyment or living purposes, not for business or investment aims.

Like-kind Exchange

A tax-deferred transaction allowing for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first asset.

Installment Method

A tax procedure that allows the taxpayer to spread the income and taxes owed on the sale of property over the period in which the payments are received.

Gross Profit Percentage

A financial ratio showing the proportion of money left over from revenues after accounting for the cost of goods sold.