MODULE 5Post-test

PREPARING THE FINANCIAL STATEMENTS

COMPREHENSIVE INCOME

1. Smile Co., an investment entity, provided the following income and expenses for the current year:

Dividend income from investments 1,520,000

Distribution income from trusts 200,000

Interest income on deposits 150,000

Income from bank treasury bills 80,000

Unrealized gain on derivative contract as cash flow hedge 400,000

Income from dealing in securities and derivatives held for trading200,000

Write-down of securities and derivatives held for trading 70,000

Other income 170,000

Finance cost 300,000

Administrative staff costs 3,800,000

Sundry administrative costs 1,200,000

Income tax expense 1,700,000

What is the total income before tax?

a. 2,900,000 b. 2,250,000 c. 2,700,000 d. 2,500,000

2. On September 30, 2020, when the carrying amount of the net assets of segment C was 7,000,000, X Company signed a binding contract to sell segment C for 12,000,000. The sale is expected to be completed by January 31, 2021, the sale contract obliges X Company to terminate certain employees of segment C incurring termination costs of 2,000,000 to be paid on June 30, 2021. The company continued to operate segment C throughout 2020. Revenue of segment C throughout 2020 was P 8,000,000, operating costs was P4,000,000.

How much income should be reported as income from discontinued segment for 2020, before tax?

a. None b. 2,000,000 c. 7,000,000 d. 8,000,000

3. Nikki Company reported the following data for the current year:

Loss from impairment of plant assets 500,000

Correction of understatement of depreciation expense

in prior years, net of tax 800,000

Income omitted from last year's financial statement 750,000

Loss on sale of one of Nikki's warehouses 300,000

Unrealized gain on AFS 600,000

Dividends received 950,000

For the current year, Nikki would report other comprehensive income of

a. 300,000 b. 600,000 c. 1,550,000 d. 1,100,000

ANSWER IT WITH COMPLETE SOLUTION AND EXPLANATION.