1. During 2019, TV555 Company was sued by a competitor for P5,000,000 for
infringement of a patent.
Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as
a provision on December 31, 2019.
Subsequently, on March 15, 2020, the Supreme Court decided in favor of the party
alleging infringement of the patent and ordered the defendant to pay the aggrieved
party a sum of P3,500,000.
The financial statements were prepared by management on February 15, 2020 and
approved by the board of directors on March 31, 2020.
What amount should be recognized as accrued liability on December 31, 2019?
a. 5,000,000
b. 3,500,000
c. 3,000,000
d. 1,500,000
2. SVT Company committed to a plan to discontinue the operations of Stone Division
on December 31, 2020. The fair value of the facilities was 2,000,000 less than
carrying amount on December 31, 2020. The division’s operating loss for 2020 was
4,000,000 and the division was actually sold for 2,350,000 less than carrying amount
in 2021. The income tax rate is 30%.
What amount should be reported as loss from discontinued operation in 2020?
a. 4,200,000
b. 4,400,000
c. 6,000,000
d. 6,350,000