1. On May 1, 2016, H Company approved a plan to dispose of a business segment.

It is expected
that the sale will occur on March 31, 2017. On December 31, 2016, the carrying amount of the
assets of the segment was P2,000,000 and the fair value less cost to disposal was P1,800,000.
During 2016, 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 discounted segment during
2016 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 loss from the discounted segment for 2016?
a. 1,000,000
b. 500,000
c. 700,000
d. 800,000

1 Total Revenues 2,200,000.00

-
Total Expenses 2,900,000.00
Impairment loss -200,000.00
Employee termination loss -100,000.00
-
Loss from discontinued operations 1,000,000.00

2. On October 1, 2016, L Company approved a formal plan to sell a business segment. The sale will
occur on March 31, 2017. The segment had income of P2,500,000 from January 1 to September
30 and P500,000 for quarter ended December 31, 2016. On December 31, 2016, the carrying
amount of 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 2016?
a. 3,000,000
b. 2,100,000
c. 1,750,000
d. 2,500,000

Income 3,000,000.00
Impairment loss -500,000.00
Income before income tax 2,500,000.00
Income tax -750,000.00
Net income 1,750,000.00
 3. Z Company had the three segments A, B and C. Management decided to dispose of Segment C.
On November 15, 2016, the carrying amount of the asset of Segment C was P90,000,000 and fair
value less cost of disposal was P70,000,000. Segment C’s revenue and expenses for 2016,
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, 2016. What is the pretax income or loss from the discontinued segment for 2016?
a. 13,000,000 income
b. 18,000,000 income
c. 30,000,000 income
d. 2,000,000 loss

50,000,000.0
Revenue 0
-
32,000,000.0
Expenses 0
-
20,000,000.0
Impairment loss 0
Loss from discontinued operations -2,000,000.00

4. S Company is a diversified entity with nationwide interests in commercial real estate

development, banking, mining and food distribution. On October 1, 2016, the board of directors
voted to approve the disposal of food distribution division. The sale is expected to occur in
August 2017. The food distribution division had the following revenue and expenses in 2016.
January 1 to September 30, revenue of P35,000,000 and expenses of P27,000,000; October 1
December 31, revenue of P15,000,000 and expenses of P10,000,000.

The carrying amount of the division’s assets on December 31, 2016 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 employee incurring an expected termination cost of P4,000,000 to be paid by
December 15, 2017. The income tax is 30%. What amount should be reported as income from
discontinued operation for 2016?

a. 9,500,000
b. 6,650,000
c. 9,000,000
d. 6,300,000

50,000,000.0
Total Revenues 0
-
37,000,000.0
Total Expenses 0
-
Employee termination loss 4,000,000.00
 Income before tax 9,000,000.00
Income tax 2,700,000.00
Net income 6,300,000.00

5. Flame Company had two divisions, North and South. In 2016, 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:

2016 2015
Sales – North 5,000,000 4,600,000
Total non tax expenses – North 4,400,000 4,100,000
Sales – South 3,500,000 5,100,000
Total non tax expenses – South 3,900,000 4,500,000
During the later part of 2016, the entity disposed of a portion of Division South and recognized a pretax
loss of P2,000,000 on disposal. The income tax rate is 30%. What amount should be reported as loss from
discontinued operation in 2016?

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

Sales 3,500,000.00
Expenses 3,900,000.00
Operating loss -400,000.00
Loss on disposal -2,000,000.00
Total loss -2,400,000.00
Tax savings 720,000.00
Net income -1,680,000.00
 6. On September 30, 2016, 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, 2017 at a selling price of P31,000,000. In addition, prior to January
31, 2017, the sale contract obliged the entity to terminate the employment of certain mployees of
the business segment incurring an expected termination cost of P2,000,000 to be paid on June 30,
2017. The segment’s revenue and expenses for 2016 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 2016?
a. 7,000,000
b. 4,900,000
c. 8,000,000
d. 5,600,000

Operating loss 6,000,000.00

Termination loss 2,000,000.00
Total Loss 8,000,000.00
Tax Benfit 2,400,000.00
Loss 5,600,000.00
 7. Jazz Company operates two restaurant, one in Boraay and one inDakak. During 2016, 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 206 and for the preceding two years
are as follows.

2016 2015 2014

Sales- Boracay 60,000 48,000 40,000
Cost of goods sold- 26,000 22,000 18,000
Boracay
Other Expenses – 14,000 13,000 12,000
Boracay
Sales – Dakak 23,000 30,000 52,000
Cos of goods sold – 14,000 19,000 20,000
Dakak
Other expenses – 17,0000 16,000 15,000
Dakak

During the later part of 2016, the entity sold much of the kitchen equipment of the Dakak
restaurant and recognized a pretax gain of P15,000 on disposal. The income tax rate is 30%. What
amount should be reported be reported as income or loss from discontinued operation for 2016?
a. 8,000 loss
b. 7,000 income
c. 5,600 loss
d. 4,900 income

Sales 23,000.00
Cost of goods sold -14,000.00
Other expenses -17,000.00
Gain on disposal 15,000.00
Income before tax 7,000.00
Income tax 2,100.00
Net income 4,900.00
 8. Purple company had correctly classified the packaging operation as a disposal group held for sale
and a discontinued operation. For the year ended December 31, 2016 this disposal group incurred
trading loss after tax of P20,000,000 and the loss on remeasuring it to fair value less ocst of
disposal was P15,000,000. What total amount of the disposal group’s losses should be included in
profit or loss for the year ended December 31, 2016?
a. 35,000,000
b. 20,000,000
c. 15,000,000
d. 0
9. In 2016, I Company decided to discontinue the E Division. On December 31, 2016, 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 2016 500,000
Expected operating loss in 2017 preceding final 1,000,000
disposal
Expected gain in 2017 on disposal of division 2,000,000

What amount should be reported as pretax loss from discontinued operation in 2016?

a. 8,000,000
b. 8,500,000
c. 9,500,000
d. 7,500,000
10. Marie Company, a parent entity approved on December 1, 2016 a plan to sell a subsidiary. The
sale is expected to be competed on March 31, 2017. The subsidiary had assets with carrying
amount of P15,000,000 including goodwill of P1,500,000 on December 31, 2016. The subsidiary
made a loss of P3,000,000 from January 1 to March 1, 2017 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 costs of disposal of P500,000. The value
in use of the subsidiary was estimated to be P10,000,000. On December 31, 2016, what is the
measurement of the subsidiary which is considered as a disposal group classified as held for sale?
a. 15,000,000
b. 10,000,000
c. 9,000,000
d. 8,500,000

11. B Company committed to sell a comic book division, a component of business, on September 1,
2016. The carrying amount of the division was P4,000,000 and the fair value less cost of disposal
was P3,500,000. The disposal date is expected to be June 1, 2017. The division reported an
operating loss of P200,000 for the year ended December 31, 2016. What amount should be
reported as pretax loss from discountinued operation in 2016?
a. 500,000
b. 200,000
c. 700,000
d. 0
 12. S Company reported the following information for the current year.

Income from continuing operations 450,000

Net Income 405,000
Distribution and administrative expenses 2,250,000
Income before income tax 900,000
What amount should be reported as income or loss from discontinued operation?
a. 450,000 income
b. 360,000 income
c. 90,000 loss
d. 45,000 loss

Income from continuing operation 450,000.00

Squeez
Loss from discontinuing operation -45,000.00 e
Net income 405,000.00