On January 1, 2021, Heaven Inc. reported the following shareholders' equity: Preference share capital (P75 par value, 20,000 shares) P 1,500,000 Ordinary share capital (P25 par value, 100,000 shares) 2,500,000 Share premium 3,000,000 Retained earnings 2,250,000 At the beginning of 2021, Heaven Inc sold for cash 20,000 additional ordinary shares for P45 per share. It was discovered late in 2021 that 2020 depreciation expense was overstated by 500,000. Heaven Inc. had a net income of P2,000,000 for 2021. It also declared cash dividend of P500,000 on preference shares and P1,000,000 on its ordinary shares during 2021. Since the depreciation expense in 2020 is overstated, what is the effect on its 2020 accumulated depreciation? A. Overstated B. Understated C. No effect D. Not applicable
On January 1, 2021, Heaven Inc. reported the following shareholders' equity:
Ordinary share capital (P25 par value, 100,000 shares) 2,500,000
Share premium 3,000,000
At the beginning of 2021, Heaven Inc sold for cash 20,000 additional ordinary shares for P45 per share.
It was discovered late in 2021 that 2020
Heaven Inc. had a net income of P2,000,000 for 2021.
It also declared cash dividend of P500,000 on preference shares and P1,000,000 on its ordinary shares during 2021.
Since the depreciation expense in 2020 is overstated, what is the effect on its 2020
A. Overstated
B. Understated
C. No effect
D. Not applicable
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