Use The Following Information For The Next Two Questions
Use The Following Information For The Next Two Questions
2. VISAGE Co. will continue to use the building until the construction of a new
headquarters is completed. How should VISAGE Co. classify the headquarters
building?
a. Included under property, plant and equipment at ₱5,000,000.
b. Included under property, plant and equipment at ₱5,800,000.
c. Classified as held for sale at ₱5,000,000
d. Classified as held for sale at ₱5,800,000
4. DECORTICATE, Inc. intends to sell the manufacturing facility, but without its
operations. The entity does not intend to transfer the facility to a buyer until after
it ceases all operations of the facility and eliminates the backlog of uncompleted
customer orders. How should DECORTICATE Co. classify the manufacturing
facility?
a. Included under property, plant and equipment at ₱6,000,000.
b. Included under property, plant and equipment at ₱4,800,000.
c. Classified as held for sale at ₱6,000,000
d. Classified as held for sale at ₱4,800,000
5. The entity does not intend to transfer the property to a buyer until after it
completes renovations to increase the property’s sales value. How should
DEMOTIC Co. classify the land and buildings?
a. Included under property, plant and equipment at ₱5,000,000.
b. Included under investment property at ₱5,000,000.
c. Included under investment property at ₱5,800,000.
d. Classified as held for sale at ₱5,800,000
6. After the renovations are completed and the property is classified as held for sale
but before a firm purchase commitment is obtained, the entity becomes aware of
environmental damage requiring remediation. The entity still intends to sell the
property. However, the entity does not have the ability to transfer the property to a
buyer until after the remediation is completed. The costs of renovations made
totaled ₱200,000. The estimated costs of remediation are ₱100,000. How should
DEMOTIC Co. classify the land and buildings?
a. Included under property, plant and equipment at ₱5,700,000.
b. Included under investment property at ₱6,000,000.
c. Included under investment property at ₱5,700,000.
d. Classified as held for sale at ₱5,700,000
11. How should FORGETIVE Co. classify the property in its 20x1 annual financial
statements?
a. Held for sale, ₱320,000 c. PPE, ₱340,000
b. Held for sale, ₱340,000 d. PPE, ₱400,000
12. During 20x2, the market conditions deteriorate further, and the asset is not sold by
December 31, 20x2. FORGETIVE Co. believes that the market conditions will
improve and has not further reduced the price of the asset. The fair value less costs
to sell on December 31, 20x2 is ₱300,000. If the property was not classified as
held for sale in 20x1, its carrying amount by this time would have been ₱350,000.
a. Held for sale, ₱300,000 c. PPE, ₱300,000
b. Held for sale, ₱320,000 d. PPE, ₱350,000
Measurement
14. On December 31, 20x1, STRIDENT HARSH-SOUNDING Co. classified its
building with a historical cost of ₱4,000,000 and accumulated depreciation of
₱2,400,000 as held for sale. All of the criteria under PFRS 5 are complied with.
On that date, the land has a fair value of ₱1,400,000 and cost to sell of ₱80,000.
The entry on December 31, 20x1 includes
a. a debit to building for ₱1,320,000
b. a credit to accumulated depreciation for ₱2,400,000
c. a debit to impairment loss for ₱280,000
d. No reclassification entry will be made on December 31, 20x1
The building was not sold in 20x2. However, the exception to the one-year
requirement was met. On December 31, 20x2, the fair value less cost to sell of
building is ₱1,240,000.
The building was not sold in 20x3. However, the exception to the one-year
requirement was still met. On December 31, 20x3, the fair value less cost to sell of
building increased to ₱1,680,000. How much is the gain on reversal of impairment to
be recognized on December 31, 20x3?
a. 440,000 b. 360,000 c. 280,000 d. 0
INSOUCIANT Co. entity estimates that the fair value less costs to sell of the disposal
group amounts to ₱52,000,000.
16. How would the reduction in the value of the assets on classification as held for
sale be treated in the financial statements?
a. The entity recognizes a loss of ₱4.4M immediately before classification as
held for sale and then recognizes an impairment loss of ₱7.6M.
b. The entity recognizes an impairment loss of ₱12 million.
c. The entity recognizes an impairment loss of ₱7.6M.
d. The entity recognizes a loss of ₱12M immediately before classifying the
disposal group as held for sale.
17. How much is the carrying amount of the inventory after classification of the
disposal group as held for sale?
a. 8,800,000 b. 7,950,576 c. 7,899,324 d. 7,765,391
18. How much is the carrying amount of the Investment property (at cost model) after
classification of the disposal group as held for sale?
a. 22,800,000b. 21,859,794 c. 21,786,665 d. 20,766,298
19. How much is the carrying amount of the PPE (at cost model) after classification of
the disposal group as held for sale?
a. 16,000,000b. 15,780,740 c. 15,340,206 d. 15,211,612
As of December 31, 20x2, the building was not yet sold and management decided not
to sell the building anymore. The fair value less cost to sell of the building on
December 31, 20x2 is ₱1,240,000 while the value in use is ₱1,220,000.
How much is the carrying amount of the building upon reclassification back to
property, plant and equipment?
a. 1,220,000 b. 1,320,000 c. 1,240,000 d. 1,200,000
Discontinued operations
21. On December 31, 20x1, INIMICAL UNFRIENDLY Co. entered into an
agreement to sell a component. On that date, INIMICAL estimated the gain from
the disposal to be made in 20x2 at ₱2,000,000 and the operating losses prior to the
date of sale to be ₱1,200,000. As a result of the sale, the component’s operations
and cash flows will be eliminated from the entity’s operations and the entity will
not have any significant continuing post-sale involvement in the component’s
operations. Accordingly, the component was classified as held for sale and
discontinued operations.
The component’s actual operating losses in 20x1 and 20x2 were ₱2,800,000 and
₱2,600,000, respectively, and the actual gain on disposal of the component in 20x2
was ₱1,600,000. INIMICAL’s income tax rate is 30%. Any income tax benefit is
expected to be realizable. There were no other temporary differences during the year.
From January 1 to April 30, 20x1, the component earned operating profit of ₱400,000
and from May 1 to December 31, 20x1, the segment suffered operating losses of
₱200,000.
The net assets of the component has a carrying amount of ₱32,000,000 as of April 30,
20x1. The fair value less costs to sell of the component is ₱26,000,000. Additional
estimated disposal loss includes severance pay of ₱220,000 and employee relocation
costs of ₱100,000, both of which are directly associated with the decision to dispose
of the segment. ABROGATE’s income tax rate is 30%. Any income tax benefit is
expected to be realizable. There were no other temporary differences during the year.