What amount of expected gain is not recognized

Reference no: EM132828358

Giraffe Company is a diversified entity with nationwide interests in commercial real estate development, banking, mining and food distribution. The food distribution division was deemed to be inconsistent with the long-term direction of the entity. On October 1,2020 the board of directors voted to approve the disposal of this division. The sale is expected to occur in August 2021. The food distribution had revenue of P15,000,000 and expenses of P10,000,000for the period October 1 to December 31.The carrying amount of the division's net assets on December 31, 2020 was P55,000,000 and the fair value less cost of disposal was P60,000,000.The sale contract required Giraffe to terminate certain employees incurring an expected termination cost of P4,000,000 to be paid by December 15, 2021. The income tax rate is 30%.

Problem 1: What amount should be reported as income from discontinued operation for 2020?

a. 7,700,000
b. 8,300,000
c. 9,000,000
d. 6,300,000

Problem 2: What amount of expected gain is not recognized?

a. 2,000,000
b. 5,000,000
c. 3,000,000
d. None of the above

Reference no: EM132828358

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