Reference no: EM132906355
The carrying value of building C on December 31, 2010 is P 8,000,000 and had remaining useful life of 25 years. It is the company's policy to depreciate all its buildings using the straight- line method.
On January 2, 2011, MAC Company committed to a plan to sell building C and properly classified this asset as held for sale. At that time, fair value less cost of disposal of Building C amounted to P 8,500,000.
During the same year, the market conditions that existed at the date the building was classified initially as held for sale deteriorated and as a result, the asset is not sold at the end of the year. MAC actively solicited but did not receive any reasonable offers to purchase the building and, in response, reduced the price to P 8,400,000. The building continues to be actively marketed at a price that is reasonable given the change in market conditions.
The following year, the market conditions deteriorate further, and building is yet to be sold. At the end of the year, MAC halts its intention to sell building C given the market condition. Recoverable amount during this time amounted to P 8,200,000.
Problem 1.) In MAC Company's December 31, 2012 statement of financial position, the building -
A. Should be included as property, plant, and equipment valued at P 7,680,000.
B. Should be reported separately as non-current asset held for sale and valued at P 7,680,000.
C. Should be included as property, plant, and equipment valued at P 7,360,000.
D. Should be reported separately as non-current asset held for sale and valued at P 7,360,000.
Problem 2.) In MAC Company's December 31, 2013 statement of financial position, the building should be valued at -
A. 8,200,000
B. 7,040,000
C. 7,680,000
D. 7,360,000
Problem 3.) In MAC Company's December 31, 2012 statement of financial position, the building should be valued at -
A. 7,680,000
B. 7,040,000
C. 8,200,000
D. 7,360,000
Problem 4.) Based on the data above, analyze the following:
I - A loss amounting to P 300,000 is recognized on the year of reclassification from held for sale to PPE should be recognized.
II - No depreciation should be recognized on year 2013.
III - Valuation of the building on the year of reclassification from held for sale to PPE should be at carrying amount before asset was classified as held for sale adjusted for any depreciation.
After analyzing, you can conclude that:
A. Minority of the statements are not untrue.
B. All of the statements are not untrue.
C. Majority of the statements are not false.
D. None of the statements are not untrue.