For the 2021 audit of the financial statements, you are tasked to audit EMPLEO Corporation's abilities. The following information relates to the obligations of EMPLEO Corporation as of December 31, 2021: Accounts payable for goods and services purchased on open account amounted to P350,000 on December 31, 2021. This amount was gross of a supplier's debit balance of P30,000, On the other hand, the testing of the accounts receivable account revealed that a customer's credit balance of P50,000 was netted against the balance of the accounts receivable At December 31, 2021, EMPLEO declared a cash dividend at PO.50 per share on its P10 par value ordinary share capital, payable at January 12, 2022, to shareholders as of December 31, 2022. At December 31, 2021, EMPLEO had 1,000,0000 issued ordinary shares and 800,000 oustanding ordinary shares. The company financed its receivables, dated November 1, 2021, by discounting its 180-day P400,000 accounts receivable to a bank on a with recourse basis at 8% on December 31, 2021. On December 31, 2021, the company purchased a machinery. The purchase was done on a deferred payment basis. The payment terms require a P100,000 downpayment and the balance with a note payable in four equal annual installments of P250,000 every December 31 starting 2022. The interest rate for similar notes is 10%. The review of minutes and confirmation letter obtained from the legal counsel of the company revealed the following information: • EMPLEO has been named a liable party for toxic waste cleanup on its land, and must pay an as-yet undetermined amount for environmental remediation activities. An adjoining land owner, Clear Toothpaste Company, sold its property because of possible toxic contamination of the water supply and resulting potential adverse public reaction towards its product. Clear Toothpaste sued EMPLEO for damages. There is reasonable possibility that Clear Toothpaste will prevail and be awarded between P250,000 and P600,000. • EMPLEO is also the defendant of a lawsuit on an incident involving an accidental crash by its company car to another vehicle. In your inspection of the letter obtained from its legal counsel, they believe that the company would be liable to pay damages amounting to P300,000, but it is also possible that it will pay up to P500,000. Question: The amount of dividends payable that should be recognized at December 31, 2021 is?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
For the 2021 audit of the financial statements, you are tasked to audit EMPLEO
Corporation's abilities. The following information relates to the obligations of
EMPLEO Corporation as of December 31, 2021:
- Accounts payable for goods and services purchased on open account amounted
to P350,000 on December 31, 2021. This amount was gross of a supplier's debit
balance of P30,000, On the other hand, the testing of the
account revealed that a customer's credit balance of P50,000 was netted against
the balance of the accounts receivable
- At December 31, 2021, EMPLEO declared a cash dividend at PO.50 per share on
its P10 par value ordinary share capital, payable at January 12, 2022, to
shareholders as of December 31, 2022. At December 31, 2021, EMPLEO had
1,000,0000 issued ordinary shares and 800,000 oustanding ordinary shares.
- The company financed its receivables, dated November 1, 2021, by discounting its 180-day P400,000 accounts receivable to a bank on a with recourse basis at 8% on December 31, 2021.
- On December 31, 2021, the company purchased a machinery. The purchase was done on a deferred payment basis. The payment terms require a P100,000 downpayment and the balance with a note payable in four equal annual installments of P250,000 every December 31 starting 2022. The interest rate for similar notes is 10%.
The review of minutes and confirmation letter obtained from the legal counsel of
the company revealed the following information:
• EMPLEO has been named a liable party for toxic waste cleanup on its land,
and must pay an as-yet undetermined amount for environmental remediation
activities.
- An adjoining land owner, Clear Toothpaste Company, sold its property because
of possible toxic contamination of the water supply and resulting potential
adverse public reaction towards its product. Clear Toothpaste sued EMPLEO
for damages. There is reasonable possibility that Clear Toothpaste will prevail
and be awarded between P250,000 and P600,000.
• EMPLEO is also the defendant of a lawsuit on an incident involving an
accidental crash by its company car to another vehicle. In your inspection of
the letter obtained from its legal counsel, they believe that the company would
be liable to pay damages amounting to P300,000, but it is also possible that it
will pay up to P500,000.
Question: The amount of dividends payable that should be recognized at December
31, 2021 is?
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