FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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At a board meeting in June 2020, Yes Co’s directors made the decision to close down one of its factories by 30 September 2020 and market both the building and the plant for sale. The decision had been made public, was communicated to all affected parties and was fully implemented by 30 September 2020.The directors of Yes Co have provided the following information relating to the closure: Of the factory’s 250 employees, 50 will be retrained and deployed to other subsidiaries within the Yes group during the year ended 30 September 2020 at a cost of P125,000.The remainder accepted redundancy at an average cost of P5,000 each. The factory’s plant had a carrying amount of P2.2 million, but is only expected to sell for P500,000, incurring P50,000 of selling costs. The factory itself
is expected to sell for a profit of P1.2 million. The company also leased a number of machines in the factory which have an average of three years to run after 30 September 2020.The present value of these future lease payments at 30 September 2020 was P1 million, however, the lessor has stated that they will accept P850,000 if paid on 30 October 2020 as a fullsettlement. Penalty payments, due to the non-completion of supply contracts, are estimated to be P200,000, 50% of which is expected to be recovered from Yes Co’s insurers. What is the profit or loss on discontinued operations relating to property, plant and equipment for the year ended30 September 2020?
A P1.75 million loss
B P1.75 million profit
C P550,000 loss
D P550,000 profit
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