I. Multiple Choice - Theories (PFRS 5: Noncurrent Asset Held for Sale and Discontinued

Operations)

1. It is group of assets to be disposed by sale or otherwise, together as a group in a single

transaction, and liabilities directly associated with those assets that will be transferred in the

transaction.

a. Disposal group

b. Discontinued Operations

c. Noncurrent asset

d. Cash generating unit

2. An entity shall classify a noncurrent asset or disposal group as "held for sale" when

a. The carrying amount of the asset or disposal group will be recovered through a sale

transaction.

b. The carrying amount of an asset or disposal group will be recovered through continuing

use.

c. The noncurrent asset or disposal group is to be abandoned.

d. The noncurrent asset or disposal group is idle or retired from active use.

3. Noncurrent asset or disposal group is classified as "held for sale" when the asset is available

for immediate sale and the sale is highly probable. For the sale to be highly probable, (choose

the incorrect one)

a. Management must be committed to a plan to sell the asset.

b. An active program to locate a buyer and complete the plan must have been initiated.

c. The asset must be actively marketed for sale at a reasonable price in relation to its current

fair value.

d. The sale is expected to qualify for recognition as a completed sale within two years from

the date of classification of the asset as "held for sale".

4. An entity shall measure a noncurrent asset or disposal group classified as held for sale at

a. Carrying amount

b. Fair value less cost to sell

c. Lower of carrying amount and fair value less cost to sell

d. Higher of carrying amount and fair value less cost to sell

5. Which statement is incorrect concerning presentation of noncurrent asset or disposal group

classified as held for sale?

a. An entity shall present a noncurrent asset held for sale and the assets of a disposal group

classified as held for sale separately from other assets.

b. The liabilities of a disposal group classified as held for sale shall be presented separately

from other liabilities.

c. The assets and liabilities a disposal group classified as held for sale shall not be offset as

a single amount.

d. An entity shall depreciate a noncurrent asset classified as held for sale or while it is part

of a disposal group classified as held for sale.

6. It comprises operations and cash flows that can be clearly distinguished, operationally and for

financial reporting purposes from the rest of the entity.

a. Component of an entity

b. Disposal group

c. Business segment

d. Corporate asset

7. A discontinued operation is a component of an entity that either has been disposed of or is

classified as held for sale and

I. Represents a separate major line of business or geographical area of operations.

II. Is part of a single coordinated plan to dispose of a separate major line of business or

geographical area of operations.

III. Is a subsidiary acquired exclusively with a view to resale

a. I only

b. I and II only

c. I and III only

d. I, II and III

8. A component of an entity is classified as a discontinued operation

I. When the entity has actually disposed of the operation.

II. When the operation meets the criteria to be classified as "held for sale."

a. Either I or II

b. Neither I nor II

c. I only

d. II only

9. What is the presentation of the results from discontinued operation in the income statement?

a. The entity shall disclose a single amount on the face of the income statement below the

income from continuing operations.

b. The amounts from discontinued operations shall be broken down over each category of

revenue and expense.

c. Discontinued operations shall be shown as a movement on retained earnings.

d. Discontinued operations shall be shown as a line item after gross profit with the taxation

being shown as part of income tax expense.

10. Which is incorrect concerning the presentation of the discontinued operation in the statement

of financial position?

a. Assets of the component held for sale are presented separately from all other assets of

the entity.

b. Assets of the component held for sale are measured at the higher of fair value less cost

to sell and their carrying amount.

c. Liabilities of the component held for sale are presented separately from all other liabilities

of the entity.

d. Depreciable assets of the component held for sale shall not be depreciated.

II. Multiple Choice - Computation (PFRS 5: Noncurrent Asset Held for Sale and Discontinued

Operations)

11. Diana Company accounts for noncurrent assets using the cost model on October 1, 2018, the

entity classified a noncurrent asset as held for sale. At that date, the carrying amount was

P3,200,000, the fair value was estimated at P2,200,000 and the cost of disposal at P200,000. On

December 15,2018 the asset was sold for net proceeds of P1,850,000. What amount should be

included as an impairment loss in the statement of comprehensive income for the year ended

December 31, 2018?

a. 1,000,000

b. 1,200,000

c. 1,350,000

d. 0

12. Helen Company accounts for noncurrent assets using the cost-model. On October 30, 2018,

the entity classified a noncurrent asset as held for sale. At that date, the carrying amount was

P1,500,000, the fair value was estimated at P1,000,000 and the cost of disposal at P150,000. On

November 20, 2018, the asset was sold for net proceeds of P800,000. What amount should be

included as loss on disposal in the statement of comprehensive income for the year ended

December 31, 2018?

a. 550,000

b. 700,000

c. 150,000

d. 0

13. Coral Company accounts for noncurrent assets using the cost model. On July 31, 2018, the

entity classified a noncurrent asset as held for sale. At that date, the carrying amount was

P1,450,000, the fair value was estimated as P2,150,000 and the cost of disposal at P150,000.

The asset was sold at January 31, 2019 for P2,120,000. At what amount should the asset be

measured in the statement of financial position on December 31, 2018?

a. 2,000,000

b. 2,150,000

c. 2,120,000

d. 1,450,000

Questions 14 and 15 are based on the following information:

Mara Company purchased equipment for P5,000,000 on January 1, 2017 with a useful life of 10

years and no residual value.

On January 1, 2019, the entity classified the asset as held for sale. The fair value of the equipment

on January 1, 2019 is P3,300,000 and the cost of disposal is P100,000.

On December 31, 2019, the fair value of the equipment is P3,800,000 and the cost of disposal is

P200,000

On December 31, 2019, 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 continue to use it.

14. What is the measurement of the equipment that ceases as held for sale on December 31,

2019?

a. 3,200,000

b. 4,000,000

c. 3,500,000

d. 3,600,000

15. What amount should be recognized in profit or loss as result of reclassification in 2019?

a. 800,000

b. 300,000

c. 400,000

d. 0

16. ABC Company committed to sell the comic book division, a component of the business, on

September 1, 2018. The carrying amount of the division was P4,000,000 and the fair value was

P3,500,000. The disposal date is expected on June 1, 2019. The division reported an operating

loss of P200,000 for the year ended December 31, 2018. Ignoring income tax, what amount

should be reported as loss from discontinued operation in 2018?

a. 500,000

b. 200,000

c. 700,000

d. 0

17. WXY Company decided on August 1, 2018 to dispose of a component of business. The

component was sold on November 30, 2018. The income for 2018 included income of P5,000,000

from operating the discontinued segment from January 1 to the sale date. The entity incurred a

loss on the November 30 sale of P4,500,000. Ignoring income tax, what amount should be

reported in the income statement for 2018 as income or loss under "discontinued operation"?

a. 4,500,000 loss

b. 5,000,000 income

c. 500,000 loss

d. 500,000 income

18. Earth Company reported the following data for the current year:

Income from continuing operations 700,000

Net income 500,000

Selling and administrative expenses 2,250,000

Income before tax 1,000,000

What amount should be reported as income or loss from discontinued operations?

a. 700,000 income

b. 500,000 income

c. 100,000 loss

d. 200,000 loss

19. Red Company has correctly classified the packaging operations as a disposal group held for

sale and as discontinued operation. For the year ended December 31, 2018, 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 disposal group's losses should be included in

profit or loss for the year ended December 31, 2018?

a. 3,500,000

b. 2,000,000

c. 1,500,000

d. 0

20. On December 31, 2018, XO Company committed to a plan to discontinue operations of

Underwear Division. The entity estimated that the division's operating loss for 2019 would be

P500,000 and that the fair value of the facilities was P300,000 less than carrying amount on

December 31, 2018. The division's operating loss for 2018 was P1,400,000 and the division was

actually sold for P400,000 less than carrying amount in 2019. Th tax rate is 30%. What amount

should be reported as loss from discontinued operation in 2018?

a. 1,700,000

b. 1,190,000