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ABC Company has two segments A and B. On July 1, 2020, the board of directors of ABC decided to dispose of segment B, an apparel division. On October 1, 2020, ABC Company signed a contract to sell segment B but the sale is expected to be completed by January 31, 2021.

ABC Company has two segments A and B. On July 1, 2020, the board of directors of ABC decided to dispose of segment B, an apparel division. On October 1, 2020, ABC Company signed a contract to sell segment B but the sale is expected to be completed by January 31, 2021.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Company has two segments A and B. On July 1, 2020, the board of directors of ABC decided to dispose of segment B, an apparel division. On October 1, 2020, ABC Company signed a contract to sell segment B but the sale is expected to be completed by January 31, 2021. Problem on discontinued operations On Decemeber 31, 2020, the carrying amount of the assets of Segment B was P3,000,000 and the carrying amount of the liabilities was P1,800,000. The Fair value less cost of disposal of segment B was P1,000,000 The sale contract required ABC Company to terminate certain employees of Segment B. The expected termination cost is P150,000 to be paid on June 30, 2021. The accounting records of ABC Company showed the following information for 2020: Segment A Segment B Sales 5,000,000 3,000,000 Cost of goods sold 2,500,000 1,400,000 1,000,000 500,000 480,000 240,000 Expenses Income tax Required: 1. Prepare the income statement of ABC Company for the year ended December 31, 2020. 2. Prepare the disclosure on notes to financial statements
Transcribed Image Text:ABC Company has two segments A and B. On July 1, 2020, the board of directors of ABC decided to dispose of segment B, an apparel division. On October 1, 2020, ABC Company signed a contract to sell segment B but the sale is expected to be completed by January 31, 2021. Problem on discontinued operations On Decemeber 31, 2020, the carrying amount of the assets of Segment B was P3,000,000 and the carrying amount of the liabilities was P1,800,000. The Fair value less cost of disposal of segment B was P1,000,000 The sale contract required ABC Company to terminate certain employees of Segment B. The expected termination cost is P150,000 to be paid on June 30, 2021. The accounting records of ABC Company showed the following information for 2020: Segment A Segment B Sales 5,000,000 3,000,000 Cost of goods sold 2,500,000 1,400,000 1,000,000 500,000 480,000 240,000 Expenses Income tax Required: 1. Prepare the income statement of ABC Company for the year ended December 31, 2020. 2. Prepare the disclosure on notes to financial statements
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