Ared Company showed the following shareholders’ equity on January 1, 2020: Share capital 1,000,000 Share premium 2,000,000 Retained earnings 4,000,000 The entity had 400,000 authorized shares of P5 par value, of which 200,000 shares were issued and outstanding. On July 1, 2020, the entity declared a property dividend of inventory payable on March 1, 2021. The inventory had a P1,200,000 carrying amount and a fair value less cost to distribute of P1,000,000 on July 1, 2020. The fair value less cost to distribute is P1,500,000 on December 31, 2020, and P900,000 on March 1, 2021. The net income for 2020 was P3,000,000. - What amount should be reported as retained earnings on December 31, 2020? - What is the dividend payable on December 31, 2020?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Ared Company showed the following shareholders’ equity on January 1, 2020:

Share capital 1,000,000

Share premium 2,000,000

Retained earnings 4,000,000

The entity had 400,000 authorized shares of P5 par value, of which 200,000 shares were issued and outstanding.

On July 1, 2020, the entity declared a property dividend of inventory payable on March 1, 2021. The inventory had a P1,200,000 carrying amount and a fair value less cost to distribute of P1,000,000 on July 1, 2020.

The fair value less cost to distribute is P1,500,000 on December 31, 2020, and P900,000 on March 1, 2021. The net income for 2020 was P3,000,000.

- What amount should be reported as retained earnings on December 31, 2020?

- What is the dividend payable on December 31, 2020?

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