Reference no: EM132488545
Question - Nam Company reported the following amounts in the shareholder's equity on January 1, 2016:
Preference share capital, P150 per value, 20,000 shares 3,000,000
Ordinary share capital, P50 per value, 100,000 shares 5,000,000
Share premium 6,000,000
Retained earnings 4,500,000
On January 1, 2016 the entity sold 20,000 additional ordinary shares for P90 per share.
Late in 2016, it was learned that because of mathematical error, an overstatement of depreciation expense by P500, 000 had occurred in 2015.
The entity reported net income of P4, 000,000 for 2016.
The entity declared cash dividend of P1,000,000 on preference shares and P2,000,000 on ordinary shares during 2016. The income tax rate is 30%.
What amount should be reported as retained earnings on December 31, 2016?
a. 5,850,000
b. 6,000,000
C. 5,150,000
d. 4,450,000
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