1. On June 1, 2013, Canadian Company approved a plan to dispose of a business segment.

It is expected that the sale will occur on April 30, 2014. On December 31, 2013, the carrying value of the net assets of the segment was P4, 000,000 and the net recoverable amount was P3, 600,000. During 2013, the company paid employees severance and relocation costs of P200, 000 as a direct result of the discontinuing operation. The revenues and the expenses of the discontinuing segment during 2013 were : REVENUE January 1 to June 1 June 1 to December 31 3, 000, 000 1, 400, 000 EXPENSES 4, 000, 000 1, 800, 000

How much will be reported as loss from ordinary activities of the discontinued segment during 2013? Solution: REVENUE: January to June 1 June 1 to December 31 EXPENSES: January 1 to June 1 June 1 to December 31 IMPAIRMENT LOSS: Carrying Value of Net Assets Recoverable Amount P4, 000, 000 3, 600, 000 ( 400, 000) P4, 000, 000 1, 800, 000 (5, 800, 000) 3, 000, 000 1, 400, 000 P4, 000, 000

TERMINATION COSTS: Severance & relocation costs Loss from ordinary activities Tax savings (2,000, 000 x 35%) ( 200, 000)

(P2, 000, 000) 700, 000

NET

(P1, 300, 000)

2. On September 1, 2013, Canadian Company approved a formal plan to sell a business segment. The sale will occur in February 2014. The segment had operating income of P5, 000, 000 from January 1 to August 31, and P1, 000, 000 for the remainder of the year 2013. On December 31, 2013, the carrying amount of the segment was P8, 000, 000 and the recoverable amount was P10, 000, 000. The income tax rate is 35%. How much will be reported as income from ordinary activities of the discontinued segment, net of tax, for the year 2013? Solution: OPERATING INCOME: January 1 to August 31 September 1 to December 31 Less: Provision for income tax (6, 000, and 000 x 35%) OPERATING INCOME FROM ORDINARY ACTIVITIES 2, 100, 000 P5, 000, 000 1, 000, 000 P6, 000, 000

P3, 900, 000

3. On September 30, 2013, when the carrying amount of the net assets of segment C was P7, 000, 000, X Company signed a binding contract to sell segment C for P12, 000, 000. The sale is expected to be completed by January 31, 2014. In addition, prior to January 31, 2014, the sale contract obliges X Company to terminate certain employees of segment C incurring termination costs of P2, 000, 000 to be paid on June 30, 2014. The Company continued to operate segment C throughout 2011. Revenue of segment C throughout 2013 was P8, 000, 000, operating cost was P4, 000, 000.

How much income should be reported as income from ordinary activities of the discontinued segment for 2013 before tax? Solution: Revenue Operating cost Termination cost P8, 000, 000 (4, 000, 000) (2, 000, 000)

OPERATING INCOME

P2, 000, 000

4. On July 1, 2013, Canadian Company has a building with a cost of P4, 000,000 and accumulated depreciation of P1, 600, 000. On the same date, Canadian Company commits to a plan to sell the building by February 1, 2014. The building has a fair value of P2, 000, 000 and it is estimated that the selling cost of the building will be P150, 000. As of July 1, 2013, the building has a remaining life of 15 years. What is the amount to be reported as the carrying value of the value of the building-held for sale as of December 31, 2013?

Solution: Fair Value date of reclassification Less: Estimated selling cost ADJUSTED FAIR VALUE OF THE ASSET P2, 000, 000 150, 000

P1, 850, 000

5. On October 1, 2013, Canadian 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, 2014. On October 1, 2013, the building has an estimated selling price of P800, 000, and it is estimated that the selling costs associated with the disposal of the building will be P120, 000. On December 31, 2013, the estimated selling price of the building has increased to P1, 200, 000, with the estimated selling costs remaining at P120, 000. At the time of reclassification as held for sale, what amount should the noncurrent asset held for sale be recognized?

Solution: Fair market value (800, 000 120, 000) Carrying value (4, 000, 000 3, 100, 000) P680, 000 P900, 000

INITIAL MEASURE OF HELD FOR SALE (LOWER) P680, 000