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

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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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

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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