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Non-Current Assets Held For Sale and Discontinued Operations
Non-Current Assets Held For Sale and Discontinued Operations
2. D
3. B
4. A
5. D
6. D
1
7. C
8. A
9. D
10. B
11. C [1M C.A. – (800K FV – 50K costs to sell)] = 250K Impairment loss
12. Solution:
Dec. Impairment loss 250,000
31, 750,000
Machinery – held for sale
20x1 2,000,000
Accumulated depreciation
Machinery 3,000,000
13. B [750K C.A. – (700K FV – 50K costs to sell)] = 100K Impairment loss
14. Solution:
Dec. Impairment loss 100,000
31, Machinery – held for sale 100,000
20x2
16. Solution:
Dec. Machinery – held for sale 350,000
31, 350,000
Gain on impairment
20x3
recovery
17. A
Solution:
C.A. adjusted for depreciation not recognized:
(1M C.A. on Dec. 31, 20x1 x 2/5*) = 400,000
Recoverable amount: (1M FV – 50K costs to sell) = 950,000
Lower amount = 400,000
*(5-yr. total life less 3 yrs. that have passed from 20x2 to 20x4) = 2 yrs.
18. Solution:
Dec. Machinery 400,000
31, 600,000
Loss on reclassification
20x4 1,000,000
Machinery – held for sale
19. D
Solution:
Impairment loss [1M - (600K - 50K)] (450,000)
2
Profit from Jan. to Mar. 200,000
Loss from Apr. to Dec. (120,000)
Total (370,000)
Multiply by: (100% - 30%) 70%
Results of discontinued operations (259,000)
Solution:
Cash (-10,000 + 30,000) 20,000
Accounts receivable, net 35,000
Inventory 58,000
Prepaid expenses 12,000
Non-current assets classified as held for sale 100,000
Total current assets 225,000
2. D
Solution:
C.A. of building 12/31/x1 = 12M x 4/5 = 9.6M
FV less costs to sell = (8M – 100K) = 7.9M
Lower amount = 7.9M
3. C
Solution:
C.A. of building 12/31/x1 = 12M x 4/5 = 9.6M
FV less costs to sell = (8M – 100K) = 7.9M
Impairment loss = (9.6M – 7.9M) = 1.7M
4. D
Solution:
5. D
Solution:
Estimated loss on sale
3
(700,000)
7. C
Solution:
8. C
Solution:
20x5 20x4
Actual operating losses (300,000) (300,000)
Actual gain on sale 650,000
10. D
Solution:
4
11. A
Solution:
187,00
Net sales revenue
0
10,20
Interest revenue
0
197,20
Adjusted total revenues 0
5
PROBLEM 39-6: EXERCISES – COMPUTATIONAL
1. Solution:
Dec. Impairment loss [8M – (7M – 200K)] 1,200,000
31, 6,800,000
Building – held for sale
20x1 12,000,000
Accumulated depreciation
Building 20,000,00
0
Dec. Impairment loss [6.8M – (6.8M – 200,000
31, 200K)] 200,000
20x2 Building – held for sale
Dec. Building – held for sale 1,400,000
31, 1,400,000
Gain on impairment
20x3
recovery
Dec. Building 5,000,000
31, 3,000,000
Loss on reclassification
20x4 8,000,000
Building – held for sale
2. Solution:
ASSSETS
Current assets:
Cash and cash equivalents
600,000
1,200,00
Trade and other receivables
0
3,600,00
Inventories
0
5,400,000
1,400,00
Noncurrent asset classified as held for sale
0
Noncurrent assets:
800,00
Investment in associate
0
Property, plant and equipment
5,000,000
Total noncurrent assets
5,800,000
6
TOTAL ASSETS 12,600,000
Noncurrent liabilities:
700,00
Deferred tax liability
0
12,600,00
TOTAL LIABILITIES & EQUITY
0
3. Solution:
ASSSETS
Current assets:
Cash and cash equivalents 1,500,000
Trade and other receivables 2,800,000
Inventories 8,440,000
12,740,00
0
Noncurrent asset classified as held for sale(1) 2,360,000
15,100,00
Total current assets 0
Noncurrent assets:
Investment property 3,500,000
Investment in associate 2,000,000
Property, plant and equipment 9,700,000
Total noncurrent assets 15,200,00
7
0
30,300,00
TOTAL ASSETS 0
Noncurrent liabilities:
Deferred tax liability 1,750,000
18,500,00
TOTAL LIABILITIES 0
30,300,00
TOTAL LIABILITIES & EQUITY
0
(1)
(1.6M equipment at FVLCS + 200K receivable + 560K inventory) = 2.360M
Revenue 5,600,000
8
4. Solution:
Revenue (2M + 2.4M) 4,400,000
Cost of goods sold (800K + 960K) (1,760,000)
Gross profit 2,640,000
Distribution costs (300K + 360K) (660,000)
Administrative expenses (150K + 180K) (330,000)
Profit before tax 1,650,000
Income tax expense (1.650M x 30%) (495,000)
Profit from continuing operations 1,155,000
Loss from discontinued operations (1) (735,000)
Profit for the year 420,000
(1)
5. Solutions:
ASSSETS
Current assets:
Cash and cash equivalents 1,800,000
Trade and other receivables 3,360,000
Inventories 10,128,000
15,288,000
Noncurrent asset classified as held for sale
2,512,000
(240K + 672K + 1.6M)
Total current assets 17,800,000
Noncurrent assets:
Investment property 4,200,000
Investment in associate 2,400,000
Property, plant and equipment 11,640,000
Total noncurrent assets 18,240,000
TOTAL ASSETS 36,040,000
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables 14,268,000
Current tax payable 5,400,000
19,668,000
Liabilities directly associated with noncurrent assets held for
432,000
sale
Total current liabilities 20,100,000
Noncurrent liabilities:
Deferred tax liability 2,100,000
9
TOTAL LIABILITIES 22,200,000
Ordinary share capital 6,000,000
Retained earnings (8.1M – 1.76M impairment loss) 6,340,000
Other components of equity 1,500,000
TOTAL EQUITY 13,840,000
TOTAL LIABILITIES & EQUITY 36,040,000
Revenue 4,720,000
(1)
10