Clara Company purchased equipment for P5,000,000 on January 1, 2021 with a useful lite of 10 years and no residual value. On December 31, 2022, the entity classified the asset as held for sale. The fair value of the equipment on December 31, 2022 is P3,300,000 and the cost of disposal is P100,000. On December 31, 2023, the fair value of the equipment is P3,800,000 and the cost of disposal is P200,000. On December 31, 2023, 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. What amount should be recognized as gain on reclassification of the equipment in 2023? a. 800,000 b. 300,000 c. 400,000 d. 0
Clara Company purchased equipment for P5,000,000 on January 1, 2021 with a useful lite of 10 years and no residual value. On December 31, 2022, the entity classified the asset as held for sale.
The fair value of the equipment on December 31, 2022 is P3,300,000 and the cost of disposal is P100,000.
On December 31, 2023, the fair value of the equipment is P3,800,000 and the cost of disposal is P200,000.
On December 31, 2023, 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.
What amount should be recognized as gain on reclassification of the equipment in 2023?
a. 800,000
b. 300,000
c. 400,000
d. 0
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