Use the information below to answer the following questions.
Brown Ltd purchased a machine on the first day of the financial period, 1 July 2010, for $100,000. The machine was depreciated using the reducing balance method and a rate of 20%. It was sold on 1 July 2011.
-If the machine was sold for $60 000,what was the gain or loss on disposal?
A) loss of $20 000
B) loss of $40 000
C) gain of $60 000
D) gain of $20 000.

Question

Quizplus · Accepted Answer

The machine's book value after one year of depreciation at 20% is $80,000 ($100,000 - $20,000). Selling it for $60,000 results in a loss of $20,000 ($80,000 - $60,000).

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