Reference no: EM133041523
Question - The Retained Earnings of Honesty Corporation as at January 1, 2018 shows a credit balance of P400,000. During the year, it was discovered that the depreciation of one unit of machinery is overstated by P200,000 in 2016. Also during the year, cash dividends of P 1.00 per share were paid to shareholders with 1,000,000 outstanding shares. In addition, due to approval by the Board of Directors through a Board Resolution, the Retained Earnings Ledger account shows a credit entry of P300,000 about change from FIFO to weighted average in costing inventories.
The following retained earnings appropriation are presented to you:
- Appropriated for treasury shares, P600,000, in which the original balance is P1,000,000 and then reduced by P400,000 because of treasury shares reissuance during the year.
- Appropriated for contingencies, P1,600,000, in which the original balance is P1,400,000 and then increased by P200,000 because of current appropriation during the year.
The statement of comprehensive income during 2018 is presented below:
Net Sales P20,000,000
Cost of Goods Sold (12,000,000)
Gross Profit P8,000,0000
Operating Expenses (4,285,000)
Profit before income tax P3,715,000
Provision for income tax (1,115,000)
Profit after tax P2,600,000
Required - What is the corrected retained earnings balance as at January 1, 2018?
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