Ignoring tax consequences, how should the gain or loss on disposal of an old machine be treated in an equipment replacement decision?
A)used to defray installation costs of the new machine
B)deducted from the accumulated amortization
C)deducted from the cost of the new machine
D)added to the accumulated amortization (or deducted from the cost)of the old machine
E)It is irrelevant.

Question

Quizplus · Accepted Answer

The gain or loss on disposal of an old machine is considered a sunk cost and does not affect the decision to replace equipment, as it does not impact future cash flows.

Ignoring Tax Consequences, How Should the Gain or Loss on Disposal