Tanner Ltd Purchased an Item of Equipment on the First

question 4

Multiple Choice

Tanner Ltd purchased an item of equipment on the first day of the financial period, 1 July 2018, 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 2020. If the machine was sold for $59 000 on 1 July 2019, what was the gain or loss on disposal?

• A) Loss of $21 000.
• B) Loss of $59 000.
• C) Loss of $61 000.
• D) Loss of $13 000.

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Definitions:

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations by comparing its interest expenses to its earnings before interest and taxes.

Income Statement

A report showing the earnings, expenses, and net income of a business during a particular period, reflecting its financial performance.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in discounting to assess investment value.

Semiannual Interest

Interest that is calculated and paid twice a year, often associated with bonds or loans.