INTERMEDIATE ACCOUNTING MODULE 3 NON-CURRENT ASSET HELD FOR SALE PDF

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DISCUSSION QUESTIONS1. What are the conditions required for a non-current asset to be classified as held for sale? - In order for a non-current asset to be classified as held for sale, there are two conditions. One is, it must be available for immediate sale. Second is, it is highly probable.2. How ...

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DISCUSSION QUESTIONS 1. What are the conditions required for a non-current asset to be classified as held for sale? -

In order for a non-current asset to be classified as held for sale, there are two conditions. One is, it must be available for immediate sale. Second is, it is highly probable.

2. How is a non-current asset or a disposal group held for sale measured in the financial statements? -

A non-current asset held for sale is initially and subsequently recorded at its carrying amount or its fair value less cost to sell, whichever is lower. It is also not depreciated.

3. When is the sale of a non-current asset considered to be highly probable? -

A sale of a non-current asset is considered highly probable if there is a commitment to a plan to sell, an active program to locate buyer, the selling price is reasonable as to its fair value, expected to be a “complete sell” within a year and lastly, the plan is unlikely to be changed or withdrawn.

4. How are non-current assets held for sale shown on the face of the statement of financial position? -

In the statement of financial position, non-current asset held for sale shall be presented separately under the line item of current assets. If the non-current asset is a disposal group, then its assets and liabilities is recorded separately on the balance sheet and is not offset.

5. How to account for changes in classification of non-current asset to noncurrent asset held for sale? -

For changes in classification of non-current asset to non-current asset held for sale, it is initially and subsequently measured as to what amount is lower between the carrying value and its fair value less cost to sell. It is also need to remember that non-current asset held for sale shall not be depreciated.

PROBLEM PROBLEM 1 1. Give the entries on March 31, 2020 and December 31, 2020 as a result of foregoing. March 31, 2020 3 ENTRIES 42,000 x = 3 12 3,500 Depreciation Expense Accumulated Depreciation

₱3,500.0 0 ₱3,500.0 0

DEPRECIATION EXPENSE (January - March 2020) =

NC

Accumulated Depreciation Impairment Loss Equipment

0 ₱31,500.0 0 ₱2,500.00 ₱70,000.0 0

₱36,000

FVLCTS, March 31, 2020 FVLCTS, December 31, 2020 less: Carrying Value less: previous impairment loss GAIN ON IMPAIRMENT

₱ 40,000.00 ₱ 36,000.00 ₱ 4,000.00 ₱ 2,500.00 ₱ 1,500.00

Carrying Value, March 31,2020 (42,000 – 3,500) ₱38,500 ₱ 2,500

IMPAIRMENT LOSS

December 31, 2020 ENTRIES NCAHFS ₱1,500.00 Gain on impairment

FVLCTS, December 31, 2020 less: Carrying Value less: previous impairment loss GAIN ON IMPAIRMENT

₱1,500.00

₱40,000.0 0 ₱36,000.0 0 ₱4,000.00 ₱2,500.00 ₱1,500.00

2. Assume instead that the fair value less cost to sell on December 31, 2020 decreased to P35,000. Give the entry on December 31, 2015. Impairment Loss ₱1,000.00 NCAHFS ₱1,000.00

FVLCTS, December 31, 2020 less: Carrying Value IMPAIRMENT LOSS

₱35,000.00 ₱36,000.00 (₱1,000.00)

PROBLEM 2 1. The depreciation expense to be recognized in 2020 is ______________. In 2020, there will be NO DEPRECIATION EXPENSE because in recording non-current assets held for sale, properties shall not be depreciated....