Reference no: EM132858869

The end of reporting period of an entity is December 31, 2020 and the financial statements for 2020 are authorized for issue on March 31, 2021.

• The entity had equity investments held for trading. On December 31, 2020, these investments were recorded at the fair value of P5,000,000. During the period up to February 15, 2021, there was a steady decline in the fair value of shares in the portfolio and on February 15, 2021, the fair value had fallen to P2,000,000.
• The entity had reported contingent liability on December 31, 2020 related to court case in which the entity was the defendant. The case was not heard until the first week of February 2021. On March 1, 2021, the judge handed down a decision against the entity. The judge determined that the entity was liable to pay damages and costs totaling P3,000,000.
• On December 31, 2020, the entity had accounts receivable from a large customer in the amount of P4,000,000. On March 15, 2021, the entity was advised in writing by the liquidator of the said customer that the customer was insolvent and that only 10% of the accounts receivable will be paid on December 31, 2021.

Problem 1: What total amount should be reported as "adjusting events" on December 31, 2020?

a. 6,600,000

b. 7,000,000

c. 9,600,000

d. 0