Indicate Whether Each of the Following Statements Is True or False

question 61

Short Answer

Indicate whether each of the following statements is true or false.
1. Depreciation expense on a building or equipment is an example of a sunk cost.
2. Addison Company is using a hole-punching machine that originally cost $80,000 and has a current market value of $45,000. The $45,000 is a measure of the opportunity cost for continuing to use the machine.
3. The purchase price of a old machine is relevant to the decision of whether or not to replace an old machine.
4. The estimated salvage value of new equipment is relevant to the decision to purchase the new equipment even though it will not happen until the end of the asset's useful life.
5. A department manager who feels pressured to maintain short-term profitability may decide to keep old equipment, even when replacing the equipment would be in the company's best interest.