On January 1, 2020, Power Company approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2021. On December 31, 2020, the carrying value of net assets of the segment was P4,000,000 and the net recoverable amount was P3,600,000. During 2020, the company paid employees severance and relocation costs of P200,000 as a direct result of the discontinuing operations. The revenues and expenses of the discontinuing segment during 2020 were: Income tax rate is 35%. 

Revenues

Expenses

January 1 to December 31 ...........................

5,800,000

4,400,000

How much will be reported as Discontinued Operation for the year 2020?

2. On September 1, 2020, Polo Company approved a formal plan to sell a business segment. The sale will occur in March 2021. The segment reported revenues and expenses of P3,000,000 and P1,600,000, respectively during 2020. On December 31, 2020, the carrying value of the segment was P8,000,000 and the recoverable value was P7,700,000. During the year 2021, the segment has yet to be disposed of. Throughout the year 2021, the segment reported revenues of P1,300,000 and expenses of P900,000. The recoverable value of the segment on December 31, 2021 is P8,400,000. Income tax rate is 35%.

How much will be reported as Discontinued Operation for the year 2021?

3. Stamp Holding Company has several operating divisions. On October 1, 2019, management decided to sell one of its division that qualifies as a separate component according to IFRS 5. The division was sold on December 18, 2019 for a net selling price of P12,000,000. On that date, the net assets of the division had a book value of P14,000,000. For the period January 1, 2019 to the date of disposal, the division reported a pretax profit from operations of P4,500,000. The company's income tax rate is 30%. Stamp Holding Company generated after-tax profits of P15,000,000 from its continuing operations.

How much is the profit or loss to be reported in the Statement of Comprehensive Income for the year 2019?

4. On October 1, 2020, Builder Company has a building with a cost of P4,000,000 and accumulated depreciation of P3,100,000. The company commits to a plan to sell the building by February 1, 2021. On October 1, 2020, the building has an estimated selling price of P800,000, and it is estimated that selling costs associated with the disposal of the building will be P80,000. On December 31, 2020, the estimated selling price of the building has increased to P1,200,000, with estimated selling costs remaining at P120,000.

Question 1: At what amount should the non-current asset be measured at the time of reclassification?

Question 2: As of December 31, 2020, what amount of gain on recovery should Builder Company recognize related to the asset held for sale?

5. On January 1, 2021, Lithium Company classifies a property as non-current asset held for sale. Immediately before the classification as held for sale, the cost of the property is P100,000 and accumulated depreciation of P 40,000. The property is depreciated using the straight-line method with a useful life of 10 years. The estimate of the fair value less cost to sell on this date was P62,000.

What amount of impairment loss should Lithium Company recognize at the date the asset was reclassified as held for sale?

6. On January 1, 2019, Polo Company classified as held for sale a non-current asset with a carrying amount of P5,000,000. On this date the non-current asset is expected to be sold for P4,600,000 with an expected cost to sell in the amount of P200,000. The non-current asset has a remaining useful life of 5 years. By December 31, 2019, the non-current asset has yet to be sold and the management after considering its options decided to place back the non-current asset into operations. The non-current asset is now estimated to be sold for P4,300,000 with an estimated selling cost of P50,000.

At what amount should the non-current asset be reported in the statement of financial position on December 31, 2019?

7. On January 1, 2020, Hydrogen Company classifies a hotel property as non-current asset held for sale. Immediately before the classification as held for sale, the carrying amount of the hotel property is P400,000,000(cost of P500,000,000 and accumulated depreciation of P100,000,000). The hotel property is depreciated using the straight-line method with a useful life of 50 years. The estimated fair value less cost to sell on this date was P350,000,000. On January 1, 2021, no buyer could be identified. On this date, management concludes that the criteria for classification as held for sale could not be met. The estimated fair value less cost to sell was revised to P340,000,000 while the value in use at that time was estimated at P 380,000,000.

Question 1: How much should be taken to profit or loss on the date the asset was reclassified back to property plant and equipment?

Question2: How much is the depreciation expense for the year 2021 after the asset was reclassified back to property, plant and equipment?