Tanner Ltd purchased an item of equipment on the first day of the financial period,1 July 2015,for $200 000.The equipment was depreciated using the reducing balance method and a rate of 40 per cent.It was sold on 1 July 2017.
-If the machine was sold for $59 000 on 1 July 2016,what was the gain or loss on disposal?

Question

Quizplus · Accepted Answer

Using the reducing balance method and a rate of 40%:
Depreciation expense for year 1 (2015-2016) = $200,000 x 40% = $80,000
Carrying amount at the end of year 1 = $200,000 - $80,000 = $120,000
Loss on sale in year 1 (selling price $59,000 - carrying amount $120,000) = $61,000
Therefore, the correct answer is option C.

Tanner Ltd Purchased an Item of Equipment on the First