Reference no: EM133113143

Question - For the 2021 audit of the financial statements, you are tasked to audit EMPLEO Corporation's liabilities. 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 P0.50 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 down payment 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.

Required -

Determine the amount of contingent liabilities that should be disclosed in the financial statements at the end of 2021?

Determine the amount of provisions that should be recognized at December 31, 2021?

Determine the total current liabilities as of December 31, 2021 amounts?