On December 1, 2018, Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. On December 31, 2018, the plant had not been sold but, due to a shortage of this type of plant, there had been an increase in the fair value to P360,000 while expected costs to sell remain at P10,000. Case 1: Any gain on the subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: a. The gain should be recognized in full. b. The gain should not be recognized. c. The gain should be recognized but not in excess of the cumulative impairment loss. d. The gain should be recognized but only in retained earnings. Case 2: If Joy Corporation sold the plant on March 1, 2019 for a net proceeds of P351,000, what amount should be included as gain on disposal in the entity’s statement of comprehensive income for the year ended 31 December 2019? a. P19,000 b. P12,000 c. P11,000 d. 1,000 Case 3: If Joy Corporation had not sold the plant as of December 31, 2019 and the recoverable amount at that date is P315,000 the plant should be carried in Joy’s statement of financial position at 31 December 2019 at a. P370,000 b. P350,000 c. 315,000 d. 305,000
On December 1, 2018, Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. On December 31, 2018, the plant had not been sold but, due to a shortage of this type of plant, there had been an increase in the fair value to P360,000 while expected costs to sell remain at P10,000. Case 1: Any gain on the subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: a. The gain should be recognized in full. b. The gain should not be recognized. c. The gain should be recognized but not in excess of the cumulative impairment loss. d. The gain should be recognized but only in retained earnings. Case 2: If Joy Corporation sold the plant on March 1, 2019 for a net proceeds of P351,000, what amount should be included as gain on disposal in the entity’s statement of comprehensive income for the year ended 31 December 2019? a. P19,000 b. P12,000 c. P11,000 d. 1,000 Case 3: If Joy Corporation had not sold the plant as of December 31, 2019 and the recoverable amount at that date is P315,000 the plant should be carried in Joy’s statement of financial position at 31 December 2019 at a. P370,000 b. P350,000 c. 315,000 d. 305,000
Chapter12: Nonrecognition Transactions
Section: Chapter Questions
Problem 57CP
Related questions
Question
On December 1, 2018, Joy Corporation decided to dispose
of an item of plant that is carried in its records at a cost
of P450,000, with accumulated depreciation of P80,000.
Depreciation on the plant since it was originally acquired
has been charged at P5,000 per month. The company
undertook all the necessary actions to be able to classify
the asset as held for sale. It is estimated that it could sell
the plant for its fair value, P350,000, incurring P10,000
selling costs in the process.
On December 31, 2018, the plant had not been sold but,
due to a shortage of this type of plant, there had been an
increase in the fair value to P360,000 while expected costs
to sell remain at P10,000.
Case 1: Any gain on the subsequent increase in the fair value
less cost to sell of a noncurrent asset classified as held
for sale should be treated as follows:
a. The gain should be recognized in full.
b. The gain should not be recognized.
c. The gain should be recognized but not in excess of
the cumulative impairment loss.
d. The gain should be recognized but only in retained earnings .
Case 2: If Joy Corporation sold the plant on March 1, 2019 for
a net proceeds of P351,000, what amount should be
included as gain on disposal in the entity’s statement
of comprehensive income for the year ended 31
December 2019?
a. P19,000
b. P12,000
c. P11,000
d. 1,000
Case 3: If Joy Corporation had not sold the plant as of
December 31, 2019 and the recoverable amount at
that date is P315,000 the plant should be carried in
Joy’s statement of financial position at 31 December
2019 at
a. P370,000
b. P350,000
c. 315,000
d. 305,000
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