Problem 7-7 (AICPA Adapted)

United Company reported the following unadjusted current assets and

shareholder’s equity at year-end:

Cash 600,000
Financial assets at fair value, including cost of P300,000 of
United Company share 1,000,000
Trade accounts receivable 3,500,000
Inventory 1,500,000
Share capital 5,000,000
Share premium 2,000,000
Retained earnings 500,000

What amount should be reported as total shareholders’ equity at year-end?

a. 7,200,000
b. 7,500,000
c. 7,800,000
d. 5,200,000

Problem 7-8 (IAA)

Bronze Company provided the following information at year-end:

Share capital 6,000,000

Share premium 3,500,000
Cumulative translation adjustment – debit 2,000,000
Treasury shares, at cost 700,000
Retained earnings 1,500,000
Cumulative unrealized gain on option contract
designated as cash flow hedge 600,000

What is the shareholders’ equity at year-end?

a. 9,500,000
b. 8,900,000
c. 7,400,000
d. 7,500,000
Problem 7-9 (IAA)

Silver Company provided the following information at year-end:

Share premium 1,000,000

Accounts payable 1,100,000
Preference share capital, at par 2,000,000
Ordinary share capital, at par 3,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury shares – ordinary 500,000
Dividends 700,000
Retained earnings – beginning 1,000,000

What is the shareholders’ equity at year-end?

a. 8,000,000
b. 8,500,000
c. 5,800,000
d. 8,700,000

Problem 7-10 (AICPA Adapted)

Kalinga Company reported the following adjusted account balances at year-end:

Share capital 15,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earning unappropriated 6,000,000
Retained earning appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment – credit 1,500,000

What amount should be reported as shareholders’ equity at year-end?

a. 31,500,000
b. 32,500,000
c. 28,500,000
d. 25,500,000
Problem 7-11 (AICPA Adapted)

When preparing a draft of year-end statement of financial position, Mont

Company reported net assets totaling P8,750,000 which included the following:

Treasury share of Mont Company at cost, which

approximates market value 250,000
Idle machinery 100,000
Cash surrender value of life insurance 150,000
Allowance for inventory writedown 50,000

What amount should be reported as net assets?

a. 8,500,000
b. 9,000,000
c. 8,450,000
d. 8,350,000

Problem 7-12 (PHILCPA Adapted)

Peach Company prepared a draft of the year-end statement of financial position.

The draft statement reported total assets of P8,500,000 which included the
following:

Treasury share of Peach Company at cost 500,000

Unamortized patent 300,000
Deferred charges 150,000
Cumulative translation loss 250,000

What amount should be reported as total assets?

a. 8,000,000
b. 7,750,000
c. 8,500,000
d. 8,250,000
Problem 8-1 (IFRS)

Dana Company accounts for noncurrent assets using the cost model. On
October 1, 2017, the entity classified a noncurrent asset held for sale. At that
date, the asset’s carrying amount was P3,200,000, the fair value was estimated
at P2,200,000 and the costs of disposal at P200,000. On December 15, 2017,
the asset was sold for net proceeds of P1,850,000.

What amount should be recognized as an impairment loss in 2017?

a. 1,000,000
b. 1,200,000
c. 1,350,000
d. 0

Problem 8-2 (IFRS)

Arlene Company accounts for noncurrent assets using the cost model. On
October 30, 2017, the entity classified a noncurrent asset held for sale. At that
date, the asset’s carrying amount was P1,500,000, the fair value was estimated
at P1,100,000 and the cost of disposal at P150,000. On November 20, 2017, the
asset was sold for net proceeds of P800,000.

What amount should be included as loss of disposal in 2017?

a. 550,000
b. 700,000
c. 150,000
d. 0

Problem 8-3 (IFRS)

Coral Company accounts for noncurrent assets using the cost model. On July 31,
2017, the entity classified a noncurrent asset as held for sale. At that date, the
asset’s carrying amount was P1,450,000, the fair value was estimated at
P2,150,000 and the costs of disposal at P150,000. The asset was sold on
January 31, 2018 for P2,120,000.

At what amount should the asset be measured on December 31, 2017?

a. 2,000,000
b. 2,150,000
c. 2,120,000
d. 1,450,000
Problem 8-4 (IFRS)

Abba Company accounts for noncurrent assets using the revaluation model. On
June 30, 2017, the entity classified a land as held for sale.

At that date, the carrying amount was P2,900,000 and the balance of the
revaluation surplus was P200,000.

On June 30, 2017, the fair value was estimated at P3,300,000 and the cost of
disposal at P200,000.

On December 31,2017, the fair value was estimated at P3,250,000 and the cost
of disposal at P250,000.

1. What is the adjusted carrying amount of the land on June 30, 2017?

a. 3,100,000
b. 3,300,000
c. 2,900,000
d. 2,700,000

2. What is the adjusted carrying amount of the land on December 31, 2017?

a. 3,100,000
b. 3,300,000
c. 3,000,000
d. 3,250,000

3. What total amount should be reported as impairment loss for 2017?

a. 100,000
b. 300,000
c. 200,000
d. 0

4. What is the revaluation surplus on December 31, 2017?

a. 600,000
b. 400,000
c. 200,000
d. 300,000
Problem 8-5 (IFRS)

Truth Company accounted for noncurrent assets using the revaluation models.
On October 1, 2017, the entity classified a land for sale.

At that date, the carrying amount of the land was P5,000,000 and the balance in
the revaluation surplus was P1,500,000.

At the same date, the fair value of the land was estimated at P5,500,000 and the
cost of disposal at P100,000.

On December 31,2017, the fair value less cost of disposal of the land did not
change. The land was sold on January 31, 2018 for P6,600,000.

1. What is the adjusted carrying amount of the land on December 31, 2017?

a. 5,000,000
b. 5,500,000
c. 5,400,000
d. 3,500,000

2. What is the impairment loss for 2017?

a. 100,000
b. 400,000
c. 500,000
d. 0

3. What is the revaluation surplus on December 31, 2017?

a. 1,500,000
b. 2,000,000
c. 1,000,000
d. 1,900,000

4. What amount should be reported as gain on disposal of land in 2018?

a. 1,000,000
b. 2,600,000
c. 500,000
d. 600,000
Problem 8-6 (IFRS)

On January 1, 2017, Racelle Company purchased a land at cost of P6,000,000.

The entity used the revaluation model for this asset.

The fair value of the land was P7,000,000 on December 31, 2017 and
P8,500,000 on December 31, 2018.

On July 1, 2019, the entity decided to sell the land and therefor classified the
asset as held for sale.

The fair value of the land on July 1, 2019 is P7,600,000. The estimated cost of
disposal is very minimal.

On December 31, 2019, the land was sold for 8,000,000.

1. What amount in OCI should be recognized in the statement of

comprehensive income for the year ended December 31, 2018?

a. 2,500,000
b. 1,500,000
c. 400,000
d. 900,000

2. What amount of gain or loss on sale of land is recognized in 2019?

a. 2,000,000 gain
b. 1,000,000 gain
c. 400,000 loss
d. 500,000 loss

3. What amount of OCI is recycled to retained earnings in 2019?

a. 1,000,000
b. 1,600,000
c. 2,500,000
d. 2,000,000
Problem 8-7 (IFRS)

On December 31, 2017, Villa Company classified as held for sale an equipment
with carrying amount of P5,000,000.

On this date, the equipment is expected to be sold for P4,600,000. Disposal cost
is expected at P200,000.

On December 31, 2018, the equipment had not been sold and management after
considering its options decided to place back the equipment into operations.

On December 31, 2018, the entity estimated that the equipment is expected to
be sold at P4,300,000 with the disposal cost at P50,000.

The carrying amount of the equipment was P4,000,000 on December 31, 2018 if
the noncurrent asset was not classified as held for sale.

1. What is the impairment loss for 2017?

a. 600,000
b. 400,000
c. 200,000
d. 0

2. What is the measurement of the equipment on December 31, 2018?

a. 4,300,000
b. 4,000,000
c. 4,400,000
d. 4,250,000

3. What is the loss on reclassification in 2018?

a. 300,000
b. 250,000
c. 400,000
d. 150,000
Problem 8-8 (IFRS)

Clara Company purchased equipment for P5,000,000 on January 1, 2017 with a

useful life of 10 years and no residual value. On December 31, 2017, the entity
classified the asset as held for sale.

The fair value of the equipment on December 31, 2017 is P4,200,000 and the
cost of disposal is P50,000.

On December 31, 2018, the fair value of the equipment is P3,500,000 and the
cost of disposal is P100,000.

On December 31, 2018, the entity believed that the criteria for classification as
held for sale can no longer be met.

Accordingly, the entity decided not to sell the asset but to continue to use it.

1. What is the impairment loss to be recognized on December 31, 2017?

a. 350,000
b. 300,000
c. 800,000
d. 750,000

2. What is the measurement of the equipment that ceases to be held for sale
on December 31, 2018?

a. 4,000,000
b. 3,500,000
c. 3,400,000
d. 4,150,000

3. What amount should be recognized as gain or loss as a result of the

reclassification in 2018?

a. 750,000 gain
b. 750,000 loss
c. 150,000 gain
d. 150,000 loss
Problem 8-9 (IFRS)

Clara Company purchased an equipment for P5,000,000 on January 1, 2017.

The equipment had a useful life of 5 years with no residual value.

On December 31, 2017, the entity classified the asset as held for sale. On such
date, the fair value less cost of disposal of the equipment was P3,500,000.

On December 31, 2018, the entity believed that the criteria for classification as
held for sale can no longer be met.

Accordingly, the entity decided not to sell the asset but to continue to use it.

On December 31, 2018, the fair value less cost of disposal of the equipment was
P2,700,000.

1. What is the carrying amount of the equipment on December 31, 2017

before classification as held for sale?

a. 5,000,000
b. 4,000,000
c. 3,500,000
d. 4,500,000

2. What is the impairment loss in 2017?

a. 1,500,000
b. 1,000,000
c. 500,000
d. 0

3. What amount should be included in profit or loss in 2018 as a result of the

reclassification of the equipment to property, plant and equipment?

a. 800,000 gain
b. 800,000 loss
c. 300,000 gain
d. 300,000 loss

4. What is the carrying amount of the equipment on December 31, 2019?

a. 2,700,000
b. 1,800,000
c. 2,000,000
d. 3,000,000
Problem 8-10 (IFRS)

On April 1, 2017, Brandy Company had a machine with a cost of 5,000,000 and
accumulated depreciation of P3,750,000.

On April 1, 2017, the entity classified the machine as held for sale and decided to
sell the machine within one year.

On April 1, 2018, the machine had an estimated selling price of P500,000 and a
remaining useful life of two years.

It is estimated that the disposal cost of the machine will be P50,000.

On December 31, 2017, the estimated selling price of the machine had increased
to P750,000 with estimated disposal cost P100,000.

1. What is the impairment loss to be recognized on April 1, 2017?

a. 450,000
b. 800,000
c. 750,000
d. 0

2. What amount should be recognized as gain on reversal of impairment on

December 31, 2017?

a. 468,750
b. 368,750
c. 300,000
d. 200,000
Problem 9-1 (AICPA Adapted)

On May 1, 2017, Harlet Company approved a plan to dispose of a business

segment. It is expected that the sale will occur on March 31, 2018.

On December 31, 2017, the carrying amount of the assets of the segment was
P2,000,000 and the fair value less cost of disposal was P1,800,000.

During 2017, the entity paid employee severance and relocation costs of
P100,000 as a direct result of the discontinued operation.

The revenue and expenses of the discontinued segment during 2017 were:

Revenue Expenses
January 1 to April 30 1,500,000 2,000,000
May 1 to December 31 700,000 900,000

What amount should be reported as pretax loss from the discontinued segment
for 2017?

a. 1,000,000
b. 500,000
c. 700,000
d. 800,000

Problem 9-2 (AICPA Adapted)

On October 1, 2017, Lann Company approved a formal plan to sell a business

segment. The sale will occur on March 31, 2018. The segment had income of
P2,500,000 from January 1 to September 30 and P500,000 for the quarter ended
December 31, 2017.

On December 31, 2017, the carrying amount of the assets of the segment was
P4,000,000 and the fair value less cost of disposal was P3,500,000. The income
tax rate is 30%.

What amount should be reported as income from the discontinued segment for
2017?

a. 3,000,000
b. 2,100,000
c. 1,750,000
d. 2,500,000
Problem 9-3 (IFRS)

Zion Company had three segments, A, B and C. Management decided to

dispose of Segment C. on November 15, 2017, the carrying amount of the assets
of Segment C was P90,000,000 and the fair value less cost of disposal was
P70,000,000.

Segment C’s revenue and expenses for 2017, respectively, were, P50,000,000
and P32,000,000, including an interest of P5,000,000 attributable to Segment C.
There was no further impairment of assets between November 15 and December
31, 2017.

What is the pretax income or loss from the discontinued segment for 2017?

a. 13,000,000 income
b. 18,000,000 income
c. 30,000,000 income
d. 2,000,000 loss

Problem 9-4 (IFRS)

Siasi Company is a diversified entity with nationwide interests in commercial real

estate development, banking, mining, and food distribution. On October 1, 2017,
the board of directors voted to approve the disposal of food distribution division.
The sale expected to occur in August 2018.

The food distribution division had the following revenue and expenses in 2017:
January 1 to September 30, revenue of P35,000,000 and expenses of
P27,000,000; October 1 to December 31, revenue of P15,000,000 and expenses
of P10,000,000.

The carrying amount of the division’s assets on December 31, 2017 was
P56,000,000 and the fair value less cost of disposal was estimated at
P60,000,000.

The sale contract required the entity to terminate certain employees incurring an
expected termination cost of P4,000,000 to be paid by December 15, 2018. The
income tax rate is 30%.

What amount should be reported as income from discontinued for 2017?

a. 9,500,000
b. 6,650,000
c. 9,000,000
d. 6,300,000
Problem 9-5 (IAA)

Flame Company had two divisions, North and South. In 2017, the entity decided
to dispose of the assets and liabilities of Division South and it is probable that the
disposal will be completed early next year. The revenue and expenses are as
follows
2017 2016
Sales-North 5,000,000 4,600,000
Total nontax expenses-North 4,400,000 4,100,000
Sales-South 3,500,000 5,100,000
Total nontax expenses-South 3,900,000 4,500,000

During the later part of 2017, the entity disposed of a portion of Division South
and recognized a pretax loss of P2,000,000 on the disposal. The income tax rate
is 30%.

What amount should be reported as loss from discontinued operation in 2017?

a. 2,000,000
b. 2,400,000
c. 1,400,000
d. 1,680,000

Problem 9-6 (IAA)

On September 30, 2017, when the carrying amount of a major subsidiary was
P30,000,000, Yolanda Company signed a legally binding contract to sell the
subsidiary. The sale is expected to be completed by January 31, 2018 at a
selling price of P31,000,000.

In addition, prior to January 31, 2018, the sale contract obliged the entity to
terminate the employment of certain employees of the business segment
incurring an expected termination cost of P2,000,000 to be paid on June 30,
2018.

The segment’s revenue and expenses for 2017 were P20,000,000 and
P26,000,000 respectively. The income tax rate is 30%.

What amount should be reported as loss from discontinued operation for 2017?

a. 7,000,000
b. 4,900,000
c. 8,000,000
d. 5,600,000
Problem 9-7 (IAA)

Jazz Company operates two restaurants, one in Boracay and one in Dakak.
During 2017, the entity decided to close the restaurant in Dakak and sell the
property. It is probable that the disposal will be completed early next year.

The revenue and expenses for 2017 and for the preceding two years are as
follows:
2017 2016 2015
Sales-Boracay 60,000 48,000 40,000
Cost of goods sold-Boracay 26,000 22,000 18,000
Other expenses-Boracay 14,000 13,000 12,000
Sales-Dakak 23,000 30,000 52,000
Cost of goods sold-Dakak 14,000 19,000 20,000
Other expenses-Dakak 17,000 16,000 15,000

During the later part of 2017, the entity sold much of the kitchen equipment of the
Dakak equipment of the Dakak restaurant and recognized a pretax gain of
P15,000 on the disposal. The income tax rate is 30%.

What amount should be reported as income or loss from discontinued operation

for 2017?

a. 8,000 loss
b. 7,000 income
c. 5,600 loss
d. 4,900 income

Problem 9-8 (IFRS)

Purple Company has correctly classified the packaging operation as a disposal

group held for sale and as discontinued operation.

For the year ended December 31, 2017, this disposal group incurred trading loss
after tax of P2,000,000 and the loss on remeasuring it to fair value less cost of
disposal was P1,500,000.

What total amount of the disposal group’s losses should be included in profit or
loss for the year ended December 31, 2017?

a. 3,500,000
b. 2,000,000
c. 1,500,000
d. 0
Problem 9-9 (IAA)

In 2017, Isuzu Company decided to discontinue Electronics Division. On

December 31, 2017, the division has not been completely sold. However, it is
probable that the disposal will be completed within a year.

Analysis of the records for the year disclosed the following information relative to
the Electronics Division:

Operating loss for the year 8,000,000

Loss on disposal of some assets during 2017 500,000
Expected operating loss in 2018 preceding final disposal 1,000,000
Expected gain in 2018 on disposal division 2,000,000

What amount should be reported as pretax loss from discontinued operation in

2017?

a. 8,000,000
b. 8,500,000
c. 9,500,000
d. 7,500,000

Problem 9-10 (IFRS)

Marie Company, a parent entity, approved on December 1, 2017 a plan to sell a

subsidiary. The sale is expected to be completed on March 31, 2018. The
subsidiary had assets with carrying amount of P15,000,000 including goodwill of
P1,500,000 on December 31, 2017.

The subsidiary made a loss of P3,000,000 from January 1 to March 1, 2018 and
is expected to make a further loss of P2,000,000 up to the date of sale.

At the date of approval of the financial statements, the entity was in negotiation
for the sale of the subsidiary but no contract had been signed. The entity expects
to sell the subsidiary for P9,000,000 and to incur cost of disposal of P500,000.
The value in use of the subsidiary was estimated to be P10,000,000.

On December 31, 2017, what is the measurement of the subsidiary which is

considered as a “disposal group of classified as held for sale”?

a. 15,000,000
b. 10,000,000
c. 9,000,000
d. 8,500,000