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The defender's original first cost is irrelevant because it is

  • A.sunk and unaffected by the present decision
  • B.already recovered through depreciation
  • C.smaller than the challenger's first cost
  • D.no longer recorded in the accounts

Answer: A

Correct answer: sunk and unaffected by the present decision

The money has gone and no decision now can retrieve it. Since the original cost is identical whether the asset is kept or replaced, it cannot distinguish between the alternatives and must be left out. What is relevant is the market value, because that is what keeping the asset actually forgoes.

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