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reference share capital, P100 par, 10% cumulative bay Tng shareholders' equity on anuary 1, 2020: rdinary share capital, no par, P5 stated value nare premium etained earnings reasury ordinary shares 2,000,000 5,150,000 3,500,000 4,000,000 400.000

reference share capital, P100 par, 10% cumulative bay Tng shareholders' equity on anuary 1, 2020: rdinary share capital, no par, P5 stated value nare premium etained earnings reasury ordinary shares 2,000,000 5,150,000 3,500,000 4,000,000 400.000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Albay Company had the following shareholders' equity on Problem 23-16 (PHILCPA Adapted) January 1, 2020: Preference share capital, P100 par, 10% cumulative Ordinary share capital, no par, P5 stated value Share premium Retained earnings Treasury ordinary shares 2,000,000 5,150,000 3,500,000 4,000,000 400,000 On January 15, 2020, the entity formally retired all the 30,000 treasury shares. The treasury shares were originally issued at P10 per share. The entity owned 10,000 shares of Digos Company purchased for P800,000. The Digos shares were included in noncurrent equity securities. On December 31, 2020, the entity declared a dividend in kind of one share of Digos for every hundred ordinary shares held by a shareholder. The fair value of the Digos share is P90 on December 31, 2020. The dividend in kind was distributed on March 15, 2021 when the fair value of Digos share is P95. On December 31, 2020, the entity declared the yearly cash dividend on preference share, payable on January 15, 2021. On January 15, 2021, before the accounting records were closed for 2020, the entity became aware that rent income for the year ended December 31, 2019 was overstated by P1,000,000. The after-tax effect on 2019 net income was P700,000. After correcting the rent income, net income for 2020 was P3,000,000.
Transcribed Image Text:Albay Company had the following shareholders' equity on Problem 23-16 (PHILCPA Adapted) January 1, 2020: Preference share capital, P100 par, 10% cumulative Ordinary share capital, no par, P5 stated value Share premium Retained earnings Treasury ordinary shares 2,000,000 5,150,000 3,500,000 4,000,000 400,000 On January 15, 2020, the entity formally retired all the 30,000 treasury shares. The treasury shares were originally issued at P10 per share. The entity owned 10,000 shares of Digos Company purchased for P800,000. The Digos shares were included in noncurrent equity securities. On December 31, 2020, the entity declared a dividend in kind of one share of Digos for every hundred ordinary shares held by a shareholder. The fair value of the Digos share is P90 on December 31, 2020. The dividend in kind was distributed on March 15, 2021 when the fair value of Digos share is P95. On December 31, 2020, the entity declared the yearly cash dividend on preference share, payable on January 15, 2021. On January 15, 2021, before the accounting records were closed for 2020, the entity became aware that rent income for the year ended December 31, 2019 was overstated by P1,000,000. The after-tax effect on 2019 net income was P700,000. After correcting the rent income, net income for 2020 was P3,000,000.
1. What amount should be charged to retained earnings for 2. What amount should be charged to retained earnings for the retirement of treasury shares on January 15, 2020? the property dividend on ordinary shares on December 100,000 b. 400,000 c. 250,000 d. a. 31, 2020? a. 950,000 b. 900,000 c. 800,000 d. 400,000 3. What amount should be charged to retained earnings for the preference dividend declared on December 31, 20202 a. 100,000 b. 150,000 c. 200,000 d. 300,000 4. What amount should be reported as retained earnings on December 31, 2020? a. 5,000,000 b. 5,200,000 c. 5,100,000 d. 4,800,000
Transcribed Image Text:1. What amount should be charged to retained earnings for 2. What amount should be charged to retained earnings for the retirement of treasury shares on January 15, 2020? the property dividend on ordinary shares on December 100,000 b. 400,000 c. 250,000 d. a. 31, 2020? a. 950,000 b. 900,000 c. 800,000 d. 400,000 3. What amount should be charged to retained earnings for the preference dividend declared on December 31, 20202 a. 100,000 b. 150,000 c. 200,000 d. 300,000 4. What amount should be reported as retained earnings on December 31, 2020? a. 5,000,000 b. 5,200,000 c. 5,100,000 d. 4,800,000
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