Note: Each question is equivalent to 2 points.

Problem 1

On June 1, 2019, Harry Compay approved a plan to dispose of a business segment. It is expected that the sale will occur on March 31, 2020. On December 31, 2019, the carrying amount of the assets of the segment was P1,800,000 and the fair value less cost of disposal was P2,000,000.

During 2019, the entity paid employee severance and relocation costs of P200,000 as a direct result of the discontinued operation. The entity is covered by the 30% corporate tax regime. The revenue and expenses of the discontinued segment during 2019 were:

Revenue Expenses

January 1 to May 31 1,500,000 2,000,000

June 1 to December 31 700,000 900,000

1. What amount should be reported as loss from the discontinued segment for 2019?
2. P600,000
3. P420,000
4. P400,000
5. P280,000

Problem 2

Sarsi Company is a diversified entity with nationwide interests in commercial real estate development, banking, mining and food distribution. On October 1, 2019, the board of directors voted to approve the disposal of the food distribution division. The sale is expected to occur in August 2020.

The food distribution division had the following revenue and expenses in 2019: January 1 to September 30, revenue of P35,000,000 and expenses of P27,000,000; October 1 to December 31, revenue of P15,000,000 and expenses of P10,000,000. The carrying amount of the division's assets on December 31, 2019 was P60,000,000 and fair value less cost of disposal was estimated at P56,000,000.

The sale contract required the entity to terminate certain employees incurring an expected termination cost of P5,000,000 to be paid by December 18, 2020. The income tax rate is 30%.

1. What amount should be reported as income from discontinued operation for 2019?
2. P 700,000
3. P1,000,000
4. P5,000,000
5. P3,500,000

Problem 3

Mount Apo Company operates in the travel industry and incurs costs unevenly through the financial year.

Advertising costs of P2,000,000 were incurred on January 1, 2020, and staff bonuses are paid at year-end based on sales. Staff bonuses are expected to be around P20,000,000 for the year. Of that sum, P3,000,000 would relate to the period ending March 31, 2020.

1. What total amount of expenses should be included in the quarterly financial report ending March 31, 2020?
2. P3,500,000
3. P5,500,000
4. P5,000,000
5. P7,000,000

Problem 4

In January 2014, Victor Inc. paid property taxes on its factory building for the calendar year 2014 in the amount of P240,000. In the first week of April 2014, Victor made an advertising campaign and paid P600,000. These advertisements are expected to benefit operations for the remainder of the calendar year.

1. How much these expenses are reflected in Victor's quarterly interim financial reports?

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

1. P 60,000 P260,000 P260,000 P260,000
2. P 60,000 P660,000 P 60,000 P 60,000
3. P240,000 P600,000 P 0 P 0
4. P210,000 P210,000 P210,000 P210,000

Problem 5

Aurora Company provided the following revenues relating to operating segments:

V 200,000

W 1,000,000

X 500,000

Y 100,000

Z 200,000

1. Assuming all of the segment revenues came from external and all of them have related operation practices, what are the reportable segments based on revenue?
2. V, W, X, Z
3. V, W, Z
4. V, W, X, Y, Z
5. W, X

Problem 6

Clara Company purchased equipment for P5,000,000 on January 1, 2019 with a useful life of 10 years and no residual value. On December 31, 2019, the entity classified the asset as held for sale. The fair value of the equipment on December 31, 2019 is P4,200,000 and the cost of disposal is P50,000. On December 31, 2020, the fair value of the equipment is P3,500,000 and the cost of disposal is P100,000. On December 31, 2020, 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 to continue to use it.

1. What is the impairment loss to be recognized in 2019?
2. P350,000
3. P300,000
4. P800,000
5. P750,000

1. What is the measurement of the equipment that ceases to be held for sale on December 31, 2020?
2. P4,000,000
3. P3,500,000
4. P3,400,000
5. P4,150,000

1. What amount should be recognized as gain or loss as a result of the reclassification in 2020?
2. P750,000 gain
3. P750,000 loss
4. P150,000 gain
5. P150,000 loss

Problem 7

Grum Corp., a publicly owned corporation, is subject to the requirements for operating segments reporting. In its income statement for the year ended December 31, 2020, Grum reported revenues of P50,000,000, operating expenses of P47,000,000, and profit of P3,000,000. Operating expenses include payroll costs of P15,000,000. Grum's combined identifiable assets of all industry segments at December 31, 2020, were P40,000,000. Reported revenues include P30,000,000 of sales to external customers.

1. In its 2020 financial statements, Grum should disclose major customer data if sales to any single customer amount to at least:
2. P3,000,000
3. P1,500,000
4. P4,000,000
5. P5,000,000

1. External revenue reported by operating segments must be at least:
2. P22,500,000
3. P15,000,000
4. P12,500,000
5. P37,500,000