Reference no: EM133178279
Problem 1 - An entity had two operating divisions, one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components.
The horse division has been unprofitable and on November 15, 2020, the entity adopted a formal plan to sell the division. At December 31, 2020, the component was considered held for sale.
On December 31, 2020, the carrying amount of the assets of the horse division was P5,000,000. On that date, the fair value of the assets less cost of disposal was/P4,000,000. The before-tax operating loss of the horse division for the year was P1,500,000.
The after-tax income from continuing operations of the entity for 2020 was P8,000,000. The income tax rate is 30%.
1. What amount should be reported as loss from discontinued operation for 2020?
a. 2,500,000
b. 1,750,000
c. 1,050,000
d. 2,050,000
2. What amount should be reported as net income for 2020?
a. 4,500,000
b. 5,600,000
c. 3,850,000
d. 6,250,000
Problem 2 - An entity accounted for noncurrent assets using the cost model. On July 1,2020, the entity classified an equipment as held for sale. At that date, the carrying amount was P5,000,000, the fair value was estimated at P3,500,000 and the cost of disposal at P100.000. On December 31, 2020, the equipment was sold for net proceeds of P2,500,000. What amount should be reported as an impairment loss for 2020?
a. 1,600,000
b. 2,500,000
c. 1,500,000
d. 900,000