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PRACTICAL ACCOUNTING PROBLEMS I SUGGESTED SOLUTIONS Discontinued Operation and Noncurrent Assets Held For Sale 1. Total revenues for the year (35M + 10M) Less: Expenses Expenses from operations (25m + 12M) Termination costs Income before taxes Less: Taxes (7M x 30%) Income from discontinued operations 45,000,000 37,000,000 1,000,000

38,000,000 7,000,000 2,100,000 4,900,000

2.

Operating loss for the year Impairment loss (6.5M 8M) Total pretax loss from discontinued operations Fair value less cost to sell (3.5M 100K) Less: Carrying amount Impairment loss (FV-CtoS is lower than CA) Fair value less cost to sell (5.5M 100K) Less: Carrying amount @ revaluation model Impairment loss (FV-CtoS is lower than CA) Selling price Less: Carrying amount after impairment Gain on sale Lower of cost and fair value less cost to sell (9M 500T)

2,000,000 1,500,000 3,500,000 A

3.

3,400,000 5,000,000 1,600,000 A

4.

5,400,000 5,500,000 100,000 6,000,000 5,400,000 600,000 D 8,500,000 D

5.

The value in use is ignored because the value should be fair value less cost to sell and not recoverable amount, which is the higher amount between the FV-C2S and Value in Use

6.

Fair value less cost to sell Less: Carrying amount ( 5M (5M / 5)) Impairment loss

3,500,000 4,000,000 ( 500,000) C

Recoverable amount (FV-C2S) CA if not reclassified (5M (5M / 5 x 2)) Lower amount Less: CA of Asset (No depreciation recorded once reclassified) Loss on reclassification to PPE

2,700,000 3,000,000 2,700,000 3,500,000 (800,000) B 900,000 C

2015 Depreciation (2.7M / 3)

5709