Reference no: EM133184762
Question - On January 1, 2021, Easy Company had ordinary and preference shares outstanding. The incorporators or original shareholders own ten ordinary shares but no preference shares.
On December 31, 2021, the entity declared dividends on the ordinary shares. The entity decided to give the ordinary shareholders a choice between receiving a cash dividend of P500,000 per share or a property dividend in the form of a noncash asset.
The noncash asset is a standard model from the entity's car fleet. Each car has a fair value of P600,000 and carrying amount of P450,000. The fair value of the car is P700,000 on December 31, 2022.
The entity estimated that 80% of the ordinary shareholders will take the option of the cash dividend and 20% will elect for the noncash asset.
a. What is the dividend payable that should be recognized on December 31, 2021?
b. What is the gain on distribution of property dividend in 2022 if the shareholders elected to receive the noncash asset?
c. What is the journal entry on December 31, 2022 if the shareholders elected to receive the cash?
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