Theory of Financial Accounting PDF

## Theory of Financial Accounting ### **Question 14-12** **Multiple Choice (AICPA Adapted)** 1. What is the purpose of reporting comprehensive income? * To report transactions with owners * To report net income over the entity performance * To replace net income with a better...

## Theory of Financial Accounting ### **Question 14-12** **Multiple Choice (AICPA Adapted)** 1. What is the purpose of reporting comprehensive income? * To report transactions with owners * To report net income over the entity performance * To replace net income with a better measure * To combine income from continuing operations with income from discontinued operations 2. Which of the following is **not **an acceptable option of reporting other comprehensive income? * In a separate statement of comprehensive income * In a single statement of comprehensive income * In the notes to financial statements * In a statement of changes in equity 3. When a complete set of financial statements is presented, comprehensive income and the components should * Appear as a part of discontinued operations. * Be reported net of related income tax effect, in total and individually. * Appear in a supplemental schedule in the notes. * Be displayed in a statement that has the same prominence as other financial statements. 4. Why is reclassification adjustment used when reporting other comprehensive income? * To reclassify an item of comprehensive income as another item of comprehensive income * To avoid double counting of items * To make net income equal comprehensive income * To adjust the income tax effect of OCI 5. The components of OCI include all, except: * Unrealized gain on derivative contract designated as cash flow hedge * Loss from translating the financial statements of a foreign operation * Actuarial gain on defined benefit plan * Dividend paid to shareholders 6. Which is **not** a component of OCI? * Foreign currency translation adjustment * Unrealized gain on financial asset held for trading * Loss on derivative designated as cash flow hedge * Change in revaluation surplus 7. Which is **not** a component of OCI? * Remeasurement of defined benefit plan * Treasury shares at cost * Foreign currency translation adjustment * Unrealized gain on equity investment at FVOCI 8. Which of the following options for displaying other comprehensive income is **preferred**? * A continuation from net income in the income statement * A separate statement that begins with net income * In the statement of changes in equity * A continuation from net income in the income statement or a separate statement that begins with net income 9. How should exchange gain or loss resulting from foreign currency transaction be accounted for? * Component of income from continuing operations * Component of other comprehensive income * Included in the statement of financial position * Included in net income for gain but deferred for loss 10. Unusual and infrequent gain and loss should be reported: * Below income from continuing operations. * As an extraordinary item. * Line item within income from continuing operations. * Component of other comprehensive income. ### **Answer 14-12** | Question | Answer | | :---: | :---: | | 1. | b | | 2. | c | | 3. | d | | 4. | b | | 5. | d | | 6. | b| | 7. | b | | 8. | d | | 9. | a | | 10. | c | ### **Question 14-13** **Multiple Choice (IAA)** 1. The term comprehensive income * Must be reported on the face of the income statement. * Includes all changes in equity except those resulting from investments by and distributions to owners. * Is the net change in owners' equity for the period. * Is synonymous with the term net income. 2. All of the following components of other comprehensive income are reclassified to profit or loss, except * Gain from translation of a foreign operation * Loss from remeasuring debt investment at FVOCI * Gain on hedging instrument in a cash flow hedge * Gain on remeasuring equity investment at FVOCI 3. Which component of other comprehensive income should be reclassified to retained earnings? * Revaluation surplus * Remeasurement of defined benefit plan * Change in fair value attributable to credit risk of financial liability designated at FVPL * All of these components of OCI should be reclassified to retained earnings 4. Earnings * Include certain gains excluded from comprehensive income * Are the same as comprehensive income * Exclude certain gains and losses included in comprehensive income * Include certain gains and losses excluded from comprehensive income 5. The two-statement approach of presenting comprehensive income is preparing * A comparative statement of comprehensive income * A combined statement of comprehensive income and retained earnings * A combined income statement and a statement of changes in equity * A separate income statement and a separate statement of comprehensive income ### **Answer 14-13** | Question | Answer | | :---: | :---: | | 1. | b | | 2. | d | | 3. | d | | 4. | c | | 5. | d | ### **Question 14-14** **Multiple Choice (IFRS)** 1. An analysis of expenses is based on * The nature of expenses. * The function of expenses. * Either the nature of expenses or the function of expenses, whichever provides information that is reliable and more relevant. * Either the nature of expenses or the function of expenses, whichever the entity would prefer to present. 2. Line items in an analysis of expenses by nature include: * Purchases, transport costs, employee benefits, depreciation, extraordinary items. * Distribution costs and administrative costs. * Depreciation, purchases, transport costs, employee benefits and advertising costs. * Cost of goods sold, administrative and distribution costs. 3. Line items in an analysis of expenses by function include: * Purchases, transport costs, employee benefits, depreciation, extraordinary items * Purchases, distribution costs, administrative costs * Depreciation, purchases, transport costs, employee benefits and advertising costs * Cost of goods sold, administrative and distribution costs 4. Under IFRS, the extraordinary item presentation * Has not changed from current rules. * Has been eliminated. * Has been eliminated from the net of tax presentation. * Has been eliminated from EPS reporting. 5. Amounts reclassified to profit or loss or retained earnings in the current period but were recognized in OCI in the current or previous periods are known as: * Correcting entries * Prior period adjustments * Unusual and irregular items * Reclassification adjustments ### **Answer 14-14** | Question | Answer | | :---: | :---: | | 1. | c | | 2. | c | | 3. | d | | 4. | b | | 5. | d | ### **Question 14-15** **Multiple Choice (IAA)** 1. The income statement reveals * Resources and equity at a point in time. * Resources and equity for a period of time * Net earnings at a point in time. * Net earnings for a period of time. 2. Conceptually, net income is a measure of * Wealth * Change of wealth * Capital maintenance * Cash flow 3. Which term cannot be used to describe a line item in the statement of comprehensive income? * Revenue * Gross income * Income before tax * Extraordinary 4. Comprehensive income includes all, except: * Revenue and gain * Expense and loss * Preference share dividend * Unrealized gain and loss on derivative contract 5. Comprehensive income includes all, except: * Dividend revenue * Loss on disposal of asset * Investment by owners * Unrealized gain on trading investment ### **Answer 14-15** | Question | Answer | | :---: | :---: | | 1. | d | | 2. | b | | 3. | d | | 4. | c | | 5. | c | ### **Question 11-1** **Explain notes to financial statements.** Notes to financial statements provide narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for recognition. Notes contain information in addition to that presented in the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows. In other words, notes to financial statements are used to report information that does not fit into the body of the statements in order to enhance the understandability of the statements. Notes to financial statements provide additional information and help clarify the items presented in the financial statements. PAS 1, paragraph 113, provides that an entity shall, as far as practicable, present notes in a systematic manner. Each item on the face of the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows shall be cross-referenced to any related information in the notes. ### **Question 11-2** **Explain the purpose of the notes to financial statements.** The purpose of the notes to financial statements is to provide the necessary disclosures required by Philippine Financial Reporting Standards. Specifically, PAS 1, paragraph 112, provides that the notes to the financial statements of an entity shall: - Present information about the basis of preparation of the financial statements and the specific accounting policies used. - Disclose the information required by Philippine. - Provide additional information that is not presented on the face of the financial statements but that is necessary for a fair presentation. ### **Question 11-3** **What is the order of presenting the notes?** PAS 1, paragraph 114, provides that notes are normally presented in the following order: - Statement of compliance with PFRS - Summary of significant accounting policies used - Supporting information or computation for line items presented in the financial statements - Other disclosures, such as contingent liabilities, unrecognized contractual commitments and nonfinancial disclosures. ### **Question 14-18** **Multiple Choice (IFRS)** 1. In the statement of changes in equity, the effect of a change in accounting policy is presented * Separately for each component of equity. * In aggregate for total equity. * In total for the amount attributable to owners of the parent and the noncontrolling interest. * Separately for the total amount attributable to owners of parent and the noncontrolling interest 2. In the statement of changes in equity, the effect of the correction of a prior period error is presented * Separately for each component of equity. * In aggregate for total equity. * In total for the amount attributable to owners of the parent and the noncontrolling interest. * Separately for the total amount attributable to owners of the parent and the noncontrolling interest. 3. Which does **not** appear in the statement of retained earnings? * Net loss * Prior period error * Preference share dividend * Other comprehensive income 4. Which appears first in a statement of retained earnings? * Net income * Prior period error * Cash dividend * Share dividend 5. Corrections of errors in prior period are included in * Retained earnings * Other comprehensive income * Net income * Share premium ### **Answer 14-18** | Question | Answer | | :---: | :---: | | 1. | a | | 2. | a | | 3. | d | | 4. | b | | 5. | a | ### **Question 14-17** **Multiple Choice (IAA)** 1. The limitations of the income statement include all of the following, except * Items that cannot be measured reliably are not reported. * Items that cannot be measured reliably are reported in net income. * Income measurement involves judgment. * Income numbers are affected by the accounting method. 2. Which of the following would represent the least likely use of an income statement? * Use by customers to determine an entity’s ability to provide needed goods and services * Use by labor unions to examine earnings closely as a basis for salary discussions * Use by government to formulate tax policy * Use by investors interested in financial position 3. The income statement would help in which of the following? * Evaluate liquidity * Evaluate solvency * Estimate amount, timing and uncertainty of future cash flows * Estimate future financial flexibility 4. Investors and creditors use income statement information for each of the following, except * To evaluate the future performance of an entity. * To provide a basis for predicting future performance. * To help assess the risk and uncertainty of achieving future cash flows. * To evaluate the past performance of an entity. 5. The income statement would help in which of the following? * Assess capital structure * Determine financial position * Estimate future cash flows * Estimate need for additional financing ### **Answer 14-17** | Question | Answer | | :---: | :---: | | 1. | b | | 2. | d | | 3. | c | | 4. | a | | 5. | c | ### **Question 14-16** **Multiple Choice (IAA)** 1. Income determination is arrived at by: * Measuring the change in owners’ equity * Identifying the change in the purchasing power * Using a transaction approach * Applying the value added concept 2. Net income equals * Assets minus liabilities * Revenue minus cost of goods sold * Revenue minus expenses * Cash receipts minus cash payments 3. Comprehensive income always * Is the same as net income * Is greater than net income * Is less than net income. * Could be greater than or less than net income. 4. Gains are * Inflows from selling a product to a customer * Increases in equity resulting from transfers of assets to the entity from owners * Increases in equity from peripheral transactions * All of these can be considered gains 5. Change in equity from nonowner sources is * Comprehensive income * Revenue * Expense * Gain or loss ### **Answer 14-16** | Question | Answer | | :---: | :---: | | 1. | c | | 2. | c | | 3. | d | | 4. | c | | 5. | a | ### **Question 11-10** **Multiple Choice (AICPA Adapted)** 1. What is the purpose of information presented in the notes? * To provide disclosures required by GAAP * To correct improper presentation in the statements * To provide recognition of amounts not included in the financial statements. * To present management response to auditor comments 2. The notes to financial statements should **not** be used to * Describe significant accounting policies * Describe depreciation methods employed * Describe the principles peculiar to an industry. * Correct an improper presentation in the statements. 3. An entity shall disclose in the summary of significant accounting policies * The measurement basis used. * All measurement bases whether used or not. * The measurement basis used in preparing the financial statements and the accounting policies used. * All of the measurement bases and the accounting policy choices available to the entity. 4. Which of the following information should be disclosed in the summary of significant accounting policies? * Refinancing of debt subsequent to the reporting period * Guarantee of indebtedness of others. * Criteria for investments treated as cash equivalents * Adequacy of pension plan assets relative to vested benefits 5. The summary of significant accounting policies should disclose * Effect of retroactive application of an accounting change * Income recognition on long-term construction contracts * Adequacy of pension plan assets * Future lease payments ### **Answer 11-10** | Question | Answer | | :---: | :---: | | 1. | a | | 2. | d | | 3. | a | | 4. | a | | 5. | a | ### **Question 11-9** **Multiple Choice (PAS 1)** 1. Which is a purpose of the notes to financial statements? * To present information about the basis of preparation of financial statements and accounting policies used. * To disclose the information required by PFRS but not presented elsewhere in the financial statements. * To provide additional information not presented but necessary for a fair presentation. * All of these can be considered a purpose of the notes to financial statements. 2. Which is the first item in presenting the notes to financial statements? * Explicit and unreserved statement of compliance with PFRS * Other disclosures, such as contingent liabilities and nonfinancial disclosures * Supporting information for items presented on the face of the financial statements * Summary of significant accounting policies. 3. An entity is required to disclose all of the following nonfinancial information, except: * A description of the nature of the entity’s operations and the principal activities * The name of the parent entity and the ultimate parent * Domicile and legal form of the entity, the country of incorporation and address of the registered office. * Names and addresses of directors and officers. 4. Notes to financial statements * Are relatively unimportant facts * Document the source of financial statement facts * Are an integral part of financial statements * Are irrelevant and immaterial facts 5. Notes to financial statements * Must be quantifiable. * Must qualify as an element. * Amplify items presented in the financial statements. * All of these are characteristics of notes to financial statements. ### **Answer 11-9** | Question | Answer | | :---: | :---: | | 1. | d | | 2. | a | | 3. | d | | 4. | c | | 5. | c | ### **Question 11-8** **Multiple Choice (IFRS)** 1. The presentation of the notes to financial statements in a systematic manner * Is voluntary * Is mandatory * Is mandatory, as far as practicable * Depends on the industry 2. The cross-reference between each line item in the financial statements and any related information disclosed in the notes to financial statements * Is voluntary * Is mandatory * Depends on the industry * Is either voluntary or mandatory 3. Disclosure of information about key sources of estimation uncertainty * Is voluntary * Is mandatory * Is either voluntary or mandatory * Depends on the industry 4. Disclosure of information about judgments * Is voluntary * Is mandatory * Is either voluntary or mandatory * Depends on the industry 5. Which best demonstrates the standard of adequate disclosure? * The separate income statement * The auditor’s report * The tax return * The notes to financial statements ### **Answer 11-8** | Question | Answer | | :---: | :---: | | 1. | c | | 2. | b | | 3. | b | | 4. | b | | 5. | d | ### **Question 12-9** **Multiple Choice (AICPA Adapted)** 1. Financial statements shall include disclosure of material transactions between related parties, except * Nonmonetary exchange by affiliates * Sales of inventory by a subsidiary to the parent when consolidated financial statements are prepared * Expense allowance for executives which exceed normal business practice * Guarantee of indebtedness to act as surety for a loan to the chief executive officer 2. Which should be disclosed as related party transaction in the entity’s separate financial statements? * Key management personnel compensation * Sales to affiliated entities * Key management personnel compensation and sales to affiliated entities * Neither key management personnel compensation nor sales to affiliated entities 3. An entity has cosigned the mortgage note on the home of its president guaranteeing the indebtedness in the event that the president should default. The entity considers the likelihood of default to be remote. How should the guarantee be treated in the financial statements? * Disclosed only * Accrued only * Accrued and disclosed * Neither accrued nor disclosed 4. Which of the following transactions most likely would be a related party transaction requiring disclosure? * The entity borrowed P1,000,000 from Southwest Bank issuing a noninterest-bearing note. * The entity borrowed P2,000,000 from Northwest Bank at a rate significantly above the prevailing market rate. * The entity borrowed P500,000 from Eastwest Bank with no scheduled terms for how or when funds will be repaid. * The entity borrowed P3,000,000 from West Bank at a rate which is a little below the prevailing market rate. ### **Answer 12-9** | Question | Answer | | :---: | :---: | | 1. | b | | 2. | c | | 3. | a | | 4. | c | ### **Question 12-8** **Multiple Choice (IFRS)** 1. Which is **not** included in key management personnel compensation? * Short-term benefit * Share-based payment * Termination benefit * Reimbursement of out-of-pocket expenses 2. Which of the following is **not** a mandated disclosure about related party transactions? * Relationship between parent and subsidiaries * Names of all the associates that an entity has dealt with during the year. * Name of the entity’s parent and, if different, the ultimate controlling party. * If neither the entity’s parent nor the ultimate controlling entity produces financial statements available for public use, then the name of the next most senior parent that does so. 3. Which of the following is **not** a required minimum disclosure about related party transaction? * The amount of related party transaction * The amount of the outstanding balance * The amount of similar transaction with unrelated parties to establish that comparable related party transaction has been entered at arm’s length * Doubtful debt related to the outstanding balance 4. Related party transactions include all, except * A venturer sold goods to the joint venture. * Sold a car to the uncle of the entity’s finance director. * Sold goods to another entity owned by the daughter of the managing director. * All of these are related party transactions. 5. All of the following are related party transactions, except * Transferred goods from inventory to a subsidiary * Sold an entity car to the wife of the managing director * Sold an asset to an associate * Took out a huge bank loan ### **Answer 12-8** | Question | Answer | | :---: | :---: | | 1. | d | | 2. | b | | 3. | b | | 4. | d | | 5. | d | ### **Question 12-7** **Multiple Choice (PAS 24)** 1. Related parties include all of the following, except * Parent, subsidiary and fellow subsidiaries * Associates * Key management personnel and close family members of such key management personnel * Two venturers simply because they share joint control over a joint venture 2. A related party transaction is a transfer * Between related parties when a price is charged. * Between related parties, regardless of whether a price is charged. * Between unrelated parties when a price is charged. * Between unrelated parties, regardless of whether a price is charged. 3. Unrelated parties include which of the following? * Providers of finance in the normal course of business * Government agencies * Single customer with a significant volume of business * All of these are unrelated parties 4. Close family members of an individual include all, except * The individual’s spouse and children * Children of the individual´s spouse * Dependents of the individual or individual´s spouse * Brothers and sisters of the individual 5. The minimum disclosures about related party transactions include all of the following, except * The amount of the transaction * Amount of outstanding balance * Allowance for doubtful accounts related to the outstanding balance * Nature of the relationship ### **Answer 12-7** | Question | Answer | | :---: | :---: | | 1. | d | | 2. | b | | 3. | d | | 4. | d | | 5. | d | ### **Question 11-11** **Multiple Choice (IAA)** 1. Which is incorrect regarding notes to financial statements? * IFRS requires specific note disclosures. * IFRS requires a maturity analysis for receivables. * IFRS requires that all notes should be clear, simple to understand and nontechnical in nature. * All of the choices are correct regarding notes. 2. The standard of adequate disclosure is best described by * All information related to operating objectives must be disclosed in the financial statements. * Information about each account balance appearing in the financial statements is included in the notes. * Enough information should be disclosed in order that a prospective investor can make a wise decision. * Disclosure of any financial facts significant enough to influence the judgment of a primary user. 3. Application of the full disclosure principle * Is theoretically desirable but not practical. * Is violated when important financial information is buried in the notes to financial statements. * Is demonstrated by the use of supplementary information presenting the effects of changing prices. * Requires that the financial statements should be consistent and comparable. 4. An inventory accounting policy that should be disclosed in a summary of significant accounting policies is * Composition of inventory into raw materials, goods in process and finished goods * Major backlog of inventory orders * Method used for pricing inventory * All of these should be disclosed. 5. Which is a method of disclosing relevant information? * Supporting schedule * Parenthetical explanation * Cross reference * All of these are methods of disclosure ### **Answer 11-11** | Question | Answer | | :---: | :---: | | 1. | c | | 2. | d | | 3. | c | | 4. | c | | 5. | d | ### **Question 15-9** **Multiple Choice (IFRS)** 1. An entity shall classify a noncurrent asset or disposal group as held for sale when * The carrying amount of the asset or disposal group is recovered through a sale transaction. * The carrying amount of the asset or disposal group is recovered through continuing use. * The noncurrent asset or disposal group is abandoned. * The noncurrent asset or disposal group is idle or retired from active use. 2. For the sale of a noncurent asset to be highly probable, which statement is **incorrect**? * Management must be committed to a plan to sell the asset. * An active program to locate a buyer and complete the plan must have been initiated. * The asset must be actively marketed for sale at a reasonable price in relation to the current fair value. * The sale is expected to qualify for recognition as a completed sale within two years from the date of classification of the asset as held for sale. 3. An entity shall measure a noncurrent asset or disposal group classified as held for sale at * Carrying amount * Fair value less cost of disposal * Lower between carrying amount and fair value less cost of disposal. * Higher between carrying amount and fair value less cost of disposal. 4. A noncurrent asset that is to be abandoned shall **not** be classified as held for sale because * The carrying amount is recovered principally through continuing use. * It is difficult to value. * It is unlikely that the noncurrent asset is sold within twelve months. * It is unlikely that there is an active market for the noncurrent asset. ### **Answer 15-9** | Question | Answer | | :---: | :---: | | 1. | a | | 2. | d | | 3. | c | | 4. | d | ### **Question 13-8** **Multiple Choice (IFRS)** 1. At the end of the current reporting period, an entity carried a receivable from a major customer who declared bankruptcy after the end of reporting period and before the issuance of financial statements. What should be reported at the current year-end? * Disclose the fact that the customer has declared bankruptcy * Make a provision for the event after reporting period in the financial statements. * Ignore the event and wait for the outcome of the bankruptcy. * Reverse the sale pertaining to the receivable in the comparative statement for the prior period. 2. An entity decided to build and operate an amusement park next year. The entity applied for a letter of guarantee which was issued before the issuance of the financial statements of the current year. What is the adjustment required at the current year-end? * Book a long-term payable for the amount of guarantee * Disclose the guarantee as a contingent liability * Increase the contingency reserve * Do nothing 3. An entity built a new factory building during the current year. Subsequent to the current year-end and before issuance of financial statements, the building was destroyed by fire and the claim against the insurance entity proved futile because the cause of the fire was negligence on the part of the caretaker of the building. What should be reported at the current year-end? * Write off the carrying amount of the building * Make a provision for one-half of the carrying amount of the building * Make a provision for three-fourths of the carrying amount of the building * Disclose the nonadjusting event in the notes to financial statements ### **Answer 13-8** | Question | Answer | | :---: | :---: | | 1. | b | | 2. | d | | 3. | d | ### **Question 13-7** **Multiple Choice (IAA)** 1. Which event after the reporting period would require adjustment? * Loss of plant as a result of fire * Change in the market price of investment * Loss on inventory resulting from flood loss * Loss on a lawsuit the outcome of which was deemed uncertain at year-end 2. Events that occur after the current year-end but before the financial statements are issued and affect the realizability of accounts receivable should be * Discussed in the management annual report. * Disclosed in the notes to financial statements. * Used to record an adjustment to bad debt expense. * An adjustment directly to retained earnings. 3. Nonadjusting events include all, except * A major business combination after reporting period. * Announcing a plan to discontinue an operation * Expropriation of major asset after reporting period * Destruction of a major production plant by a fire before the end of the reporting period 4. Nonadjusting events include all, except * The entity announced a discontinued operation. * An agreement to purchase the leased building. * Distruction of a major production plant by fire * A mistake in the calculation of allowance for doubtful accounts. 5. Which event after the end of reporting period would generally require disclosure? * Retirement of key management personnel * Settlement of litigation when the event that gave rise to the litigation occurred in a prior period * Strike of employees * Issue of a large amount of ordinary shares ### **Answer 13-7** | Question | Answer | | :---: | :---: | | 1. | d | | 2. | c | | 3. | d | | 4. | d | | 5. | d | ### **Question 13-6** **Multiple Choice (IFRS)** 1. Events after the end of reporting period are favorable or unfavorable events that occur between: * The end of the reporting period and the date of the next annual financial statements. * The end of the reporting period and the date of the next interim or annual financial statements. * The end of the reporting period and the date when the financial statements are authorized for issue. * The end of reporting period and the date of the next interim financial statements. 2. Adjusting events are events that * Provide evidence of conditions that existed at the end of the reporting period. * Are favorable and indicative of conditions that arose after the end of the reporting period. * Are unfavorable and indicative of conditions that arose after the end of the reporting period. * Provide evidence of conditions that existed after the date the financial statements were authorized for issue. 3. Which statement is true about nonadjusting events? * The entity shall disclose the nature and effect of the event in the financial statements. * The entity shall adjust the related amount in the financial statements. * The entity shall disclose the nature and effect of the event and adjust the related amount. * The entity shall disclose nothing 4. The financial statements are authorized for issue * When the board of directors reviews the financial statements and authorizes them for issue. * When the financial statements are made available to shareholders. * When the shareholders approve the financial statements at their annual meeting. * When the approved financial statements are filed with a regulatory body. ### **Answer 13-6** | Question | Answer | | :---: | :---: | | 1. | c | | 2. | a | | 3. | a | | 4. | a | ### **Question 16-6** **Multiple Choice (AICPA Adapted)** 1. When a component of an entity was discontinued during the current year, the loss on discontinued operation should * Exclude the associated employee relocation cost. * Exclude operating loss for the period. * Include associated employee termination cost. * Exclude associated lease cancellation cost. 2. When an entity decided to sell a component, the gain on disposal should be * Presented as other income. *