Identify the possessive noun in the sentence: "That is Sarah's backpack."

In the sentence "That is Sarah's backpack," the possessive noun is "Sarah's." A possessive noun indicates ownership or belonging. Here, "Sarah's" shows that the backpack belongs to Sarah. The apostrophe followed by the "s" in "Sarah's" clearly indicates this ownership.

The other words in the sentence serve different purposes: "That" functions as a demonstrative pronoun, "backpack" is a common noun referring to an object, and "is" is a verb that indicates a state of being. Therefore, "Sarah's" is the only word that denotes possession within this context.