Answered: True or False 1. When there is a…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 27CYBK

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Question

True or False

1. When there is a change in the plan to sell a held for sale asset, that asset is reclassified back to its previous classification and measured at its carrying amount before it was classified as held for sale, adjusted for any depreciation, amortization or revaluation that would have been recognized had the asset not been classified as held for sale.

2. Profit from continuing operation does not include extraordinary items, discontinued operations, or cumulative effects of changes in accounting principles.

3. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.

4. A component of an entiry can be cash generating unit or group of cash generating units.

Use the following information for the next two questions:

An entity, a brewer of beer, has three major product lines - Brand A, Brand B and Brand C. Each product line comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. On March 1, 20x1, tthe entity commits to a plan to sell Brand A to another compan. All the conditions for classification as held for sale under PFRS 5 are met.

5. The results of operations of Brand A from March 1, 20x1 until the date of its disposal shall be excluded from continuing operations and shall be presented as a single amount net of tax.

6. When the 20x1 financial statements are issued, the comparative financial statements of the preceding period shall be restated to exclude the results of operations of Brand A from continuing operations.

7. Closing down one plant of three making the same product would be reported as discontinued operations.

8. To qualify as a discontinued operation for reporting purposes, the assets and related activities of the segment must be clearly distinguishable from other assets, operating results, and general activities of the company, both physically and operationally, as well as for financial reporting purposes.

9. Profit for the year includes discontinued operations

10. A subsidiary acquired exclusively with a view to resale may qualify as a discontinued operation.

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