CASE A (For the next 5 questions) You were tasked to audit the Noncurrent Assets Held for Sale Account of Hero Company f
Posted: Wed Jul 06, 2022 6:00 am
CASE A (For the next 5 questions)
You were tasked to audit the Noncurrent Assets Held for SaleAccount of Hero Company for the year ended 2022. Afterdetailed investigation, you have obtained the following informationon these accounts:
On January 2, 2021, Hero Company committedto a plan to sell Building C and classified this asset as held forsale. Building C was priced at Php8,500,000 which is equal toits fair market value.
During 2021, the market conditions formanufacturing facilities that existed at the date the building wasclassified initially as held for sale deteriorated and as a result,Building C was not sold at the end of 2021. During 2021, thecompany actively solicited by did not receive any reasonable offerto purchase Building C and, in response, reduced the price toPhp8,400,000. Building C continued to be actively marketed ata price that was reasonable given the change in marketconditions.
In 2022, the market conditions deterioratedfurther, and Building C is yet to be sold by the end of 2022. Hero Company believes that the market conditions will improve andhas not further reduced the price of the building. Building Ccontinues to be held for sale at a price in excess of its currentfair value.
Required:
At the time of reclassificationof Building A as held for sale, what amount should the noncurrentasset held for sale be recognized and What amount of lossshould Hero Company recognize at the time Building A wasreclassified as held for sale?
You were tasked to audit the Noncurrent Assets Held for SaleAccount of Hero Company for the year ended 2022. Afterdetailed investigation, you have obtained the following informationon these accounts:
On January 2, 2021, Hero Company committedto a plan to sell Building C and classified this asset as held forsale. Building C was priced at Php8,500,000 which is equal toits fair market value.
During 2021, the market conditions formanufacturing facilities that existed at the date the building wasclassified initially as held for sale deteriorated and as a result,Building C was not sold at the end of 2021. During 2021, thecompany actively solicited by did not receive any reasonable offerto purchase Building C and, in response, reduced the price toPhp8,400,000. Building C continued to be actively marketed ata price that was reasonable given the change in marketconditions.
In 2022, the market conditions deterioratedfurther, and Building C is yet to be sold by the end of 2022. Hero Company believes that the market conditions will improve andhas not further reduced the price of the building. Building Ccontinues to be held for sale at a price in excess of its currentfair value.
Required:
At the time of reclassificationof Building A as held for sale, what amount should the noncurrentasset held for sale be recognized and What amount of lossshould Hero Company recognize at the time Building A wasreclassified as held for sale?