COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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On December 31, 2005, Brown Co. had a machine with an original cost of $90, 000, accumulated depreciation of $75, 000, and an estimated salvage value of zero. On December 31, 2005, Brown was considering the purchase of a new machine having a five-year life, costing $150, 000, and having an estimated salvage value of $30, 000 at the end of five years. In its decision concerning the possible purchase of the machine, how much should Brown consider as sunk cost at December 31, 2005?
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$150, 000
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$120, 000
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$90, 000
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$15, 000
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Explanation:
Detailed explanation-1: -A machine with a cost of $130, 000, accumulated depreciation of $85, 000, and current year depreciation expense of $17, 000 is sold for $40, 000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: a. $45, 000.
Detailed explanation-2: -Equipment originally costing $100, 000 has accumulated depreciation of $65, 000. If it is sold for $40, 000, the company should record: A gain of $5, 000.
There is 1 question to complete.