Name:______________________________________________ Score/Rating:____/____
1. Lynx Company is planning to dispose of a collection of assets. The entity
designated these assets as a disposal group. The carrying amount of
these assets immediately before classification as held for sale was
P2,000,000. Upon being classified as held for sale, the assets were
revalued to P1,800,000. The entity feels that it would cost P100,000
to sell the disposal group. What is the carrying amount of the disposal
group after the classification as held for sale?
An entity accounted for noncurrent assets using the cost model. On July
1, 2017, the entity classified an equipment as held for sale. At that
date, the carrying amount was P5,000,000, the fair value was estimated
at P3,500,000 and the cost of disposal at P100,000. On December 31,2017,
the equipment was sold for net proceeds of P2,500,000.
2. What amount should be reported as an impairment loss for 2017?
3. What amount should be reported as loss on disposal for 2017?0,000
4. On April 1, 2017, Brandy Company has a machine with a cost of P1,000,000
and accumulated depreciation of P750,000. On April 1, 2017, the entity
classified the machine as “held for sale” and decided to sell the machine
within 1 year. On April 1, 2017, the machine had an estimated selling
price of P100,000 and a remaining useful life of 2 years. It is estimated
that the selling cost associated with the disposal of the machine will
be P10,000. On December 31, 2017, the estimated selling price of the
machine had increase to P150,000 with estimated selling cost of P20,000.
What amount should be recognized as gain on reversal of impairment on
December 31, 2017?
An entity accounted for noncurrent assets using the revaluation model.
On October 1, 2017, the entity classified a land as held for sale. At
that date, the carrying amount of the land was P5,000,000 and the balance
in the revaluation surplus was P1,500,000. At same date, the fair value
of the land was estimated at P5,500,000 and the cost of disposal at
P100,000. On December 31,2017, the fair value less cost of disposal
of the land did not change. The land was sold on January 31, 2018 for
P6,000,000.
5. What is the carrying amount of the land on December 31, 2017? 5,400,000
Date:_________________ IAC FAR-Q3
6. What amount should be reported as gain on disposal of land in 2018?
An entity purchased an equipment for P5,000,000 on January 1, 2017.
The equipment had a useful life of 5 years with no residual value. On
December 31,2017, the entity classified the asset as held for sale.
On such date, the fair value less cost of disposal of the equipment
was P3,500,000.
On December 31, 2018, 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. On
December 31,2018, the fair value less cot of disposal of the equipment
was P2,700,000.
7. What is the carrying amount of the equipment on December 31, 2017 before
classification as held for sale?
8. What amount of impairment loss should be recognized in 2017?
9. What amount should be included in profit or loss in 2018 as a result
of the reclassification of the equipment to property, plant and
equipment?
10. What is the carrying amount of the equipment on December 31, 2019?
11. Purple Company has correctly classified its packaging operation as a
disposal group held for sale and as discontinued operation. For the
year ended December 31, 2017, this disposal group incurred trading loss
after tax of P2,000,000 and the loss on remeasuring it to fair value
less cost of disposal was P1,500,000. What total amount of the disposal
group’s losses should be included in profit or loss for the year ended
December 31, 2017?
12. In 2017, Isuzu Company decided to discontinue its Electronics Division,
a separately identifiable component of Isuzu’s business. On December
31, 2017, the division has not been completely sold. However,
negotiations for the final and complete sale are progressing in a
positive manner and it is probable that the disposal will be completed
within a year. Analysis of records for the year disclosed the following
relative to the Electronics Division:
Operating loss for the year 8,000,000
Loss on disposal of some Electronics Division
 assets during 2017 500,000 The income statement information calculated by the average cost method
was as follows:
Expected operating loss in 2018 preceding final disposal 1,000,000
2016 2017
Expected gain in 2018 on disposal of division 2,000,000
Sales 10,000,000 13,000,000
What amount should be reported as pretax loss from discontinued
operation in 2017? Cost of goods sold 7,000,000 9,000,000
Operating expenses 1,500,000 2,000,000
13. On December 1, 2015, Camille Company committed to dispose of a business Income before tax 1,500,000 2,000,000
component’s assets. The disposal met the requirements to be classified
as discontinued operations. Om such date, the entity estimated that Tax expense 450,000 600,000
the loss from disposition would be P700,000 and the component’s The entity accrues tax expense on December 31, 2017 of each year and
operating loss for 2015 was P200,000. What amount of pretax loss should pays the tax in April of the following year. The income tax rate is
be reported for discontinued operations in the income statement for 30%. What is the net income to be reported in 2017 after the change
2015? to the FIFO inventory method?

14. Goddard Company had used the FIFO method of inventory valuation since 16. On January 2, 2014, Leah Company purchased a large quantity of personal
it began operations in 2014. The entity decided to change to the weighted computers. The cost of these computers was P5,000,000. On the date of
average method for determining inventory costs at the beginning 21017. purchase, the management estimated that the computers would last
The following schedule shows year-end inventory balances under FIFO approximately 5 years and would have a salvage value at that time of
and weighted average method. P500,000. The company used the double-declining balance method of
Year FIFO Weighted average depreciation. During 2015, the management realized that technological
advancements had made the computers virtually obsolete and that they
2014 4,500,000 5,400,000 would have to be replaced. Management now believes that the useful life
of the computers should have been 3 years from the date of acquisition
2015 7,800,000 7,100,000 and decided to depreciate the computers using the new estimate. What
2016 8,300,000 7,800,000 is the depreciation to be recognized for the year 2015?

What amount, before income tax, should be reported in the 2017 statement
of retained earnings as the cumulative effect of the change in accounting 17. During 2017, an entity decided to change from the FIFO method of
policy? (increase/decrease) inventory valuation to the weighted average method. Inventory balances
under each method method were:

15. On January 1, 2017, Folk Company changed from the average cost method FIFO Weighted average
to the FIFO method to account for its inventory. Ending inventory for December 31, 2014 4,500,000 5,400,000
each method was as follows:
December 31, 2015 7,800,000 7,100,000
2016 2017
December 31, 2016 8,300,000 7,800,000
Average cost 500,000 900,000
Assuming income tax rate of 30%, what amount should be reported as the
FIFO cost 700,000 1,400,000 effect of this accounting change in the statement of retained earnings
for 2017?

18. Rodrigo Company had purchased an equipment on January 1, 2017 for
P2,400,000. The entity used the straight line depreciation based on
a ten-year useful life with no residual value. During 2017, the entity
decided that the equipment would be used only three more years. What
entry should be made on January 1 2017 to reflect this accounting change?
A. The carrying amount of the asset or disposal group is recovered
through a sale.
B. The carrying amount of the asset or disposal group is recovered
through continuing use.
C. The noncurrent asset or disposal group is to be abandoned.

A. Debit other comprehensive income and credit accumulated D. The noncurrent asset or disposal group is idle or retired from active
depreciation for P480,000 use.

B. Debit retained earnings and credit accumulated depreciation for 23. When an entity discontinued an operation and disposed of the
P480,000 discontinued operation, the results of the discontinued operation
should be reported net of tax as
C. Debit depreciation and credit accumulated depreciation for P480,000
A. A prior period adjustment
D. No entry
B. An other income and expense item
19. Xavier Company purchased a machinery on January 1, 2014 for P7,200,000.
The machinery has useful life of 10 years with no residual value and C. A single amount after continuing operations and before net income
was depreciated using the straight line method. In 2017, a decision D. A bulk sale of plant assets included in income from continuing
was made to change the depreciation method from straight line to sum operations
of years’ digits method. The estimated useful life and residual value
remained unchanged. What is the depreciation for 2017? 24. A change in accounting policy should be made only if
I. Required by statute.
20. The key characteristic for the classification of an asset as held for II. Required by the Accounting Standards Council.
sale is that the carrying amount of the asset must
III.The change will result in a more appropriate presentation of
A. Be lower than the initial cost of the asset events and transactions in the financial statements of the
enterprise.
B. Be higher than its NRV
A. I, II and III. C. I and II only.
C. Principally be recovered through a sale transaction
B. I and III only. D. II and III only.
D. Principally be recovered through continuing use
25. A change in reporting entity is actually a change in
21. A component of an entity is classified as discontinued when
A. Accounting policy (principle) C. Accounting assumption
I. When the entity is actually disposed of the operation
B. Accounting estimate D. Accounting concept
II. When the operation meets the criteria to be classified as held for
sale 26. A noncurrent asset that is to be abandoned should not be classified
as held for sale because
A. Either I or II C. I only
A. The carrying amount is recovered principally through continuing use
B. Neither I or II D. II only
B. It is difficult to value
22. An entity shall be classify a noncurrent asset or disposal group as
held for sale when C. It is unlikely that the noncurrent asset will be sold within 12 months
 D. It is unlikely that there will be an active market for the noncurrent
asset
27. A noncurrent asset or disposal group shall be classified as held for
sale when
A. The sale is highly probable
B. The asset is available for immediate sale in the present condition
C. The sale is possible and the asset is available for sale in the
present condition
D. The sale is probable and the asset is available for immediate sa;e
in the present condition

28. What is the benchmark treatment of a change in accounting policy?

A. Retroactively, meaning any resulting adjustment is reported as an
adjustment to the opening balance of retained earnings
B. Prospectively, meaning, no adjustments to prior periods are made
either to the opening balance of retained earnings or in reporting
the net income or loss for the current period because existing
balance are recalculated.
C. Currently, meaning, any resulting adjustment is included in the
determination of the net income or loss for the period.
D. Retroactively, meaning, any resulting adjustment is included in
equity.
29. If it is difficult to distinguish a change in accounting estimate and
a change in accounting policy, the change is treated as
A. Change in accounting policy C. Fundamental error
B. Change in accounting estimate D. Extraordinary item
30. An entity owned an old building that is being marketed for sale which
the entity expected to complete in four months. Which statement is
incorrect regarding the old building?
A. It will be reclassified as an asset held for sale
B. It will be classified as a current asset.
C. It will no longer depreciated
D. It will be measured at historical cost