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Module 33 Retained Earnings Problem

The document contains 3 problems involving retained earnings and dividend transactions: 1. A real estate company declared a property dividend of flats to shareholders and provides details to calculate the dividend payable, impairment loss, and gain/loss on settlement. 2. An entity declared a share dividend and provides equity balances and share prices to calculate the retained earnings balance after distributing the dividend. 3. An entity had various equity transactions including accounting method changes, error corrections, treasury share cancellation, cash dividends, and net income, and asks to calculate the retained earnings balance.

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71 views

Module 33 Retained Earnings Problem

The document contains 3 problems involving retained earnings and dividend transactions: 1. A real estate company declared a property dividend of flats to shareholders and provides details to calculate the dividend payable, impairment loss, and gain/loss on settlement. 2. An entity declared a share dividend and provides equity balances and share prices to calculate the retained earnings balance after distributing the dividend. 3. An entity had various equity transactions including accounting method changes, error corrections, treasury share cancellation, cash dividends, and net income, and asks to calculate the retained earnings balance.

Uploaded by

Thalia Uy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PSBA Integrated Review

Financial Accounting and Reporting – Problem Christian Aris Valix


Retained earnings and Dividend transactions

1. An entity, which is a real estate developer, is owned by four founding shareholders. On


October 1, 2021, the entity declared a property dividend of a “one-bedroom” flat for each
share holder. The dividend is payable on January 15, 2022. On October 1, 2021, the carrying
amount and fair value of each flat are P900,000 and P1,200,000 respectively. On December
31, 2021 and January 15, 2022, the fair values of each flat are P800,000 and P980,000.
Compute the dividend payable on October 1,2021 and on December 31, 2021. Compute any
impairment loss on December 31, 2021 and the gain or loss on settlement on January 15,
2022.

2. On January 1, 2021, an entity had the following equity balances:

Share capital, P50 par value per share 16,000,000


Share premium 5,500,000
Retained earnings – unappropriated 2,600,000
Retained earnings - appropriated for treasury shares 800,000
Treasury shares, 20,000 shares at cost 800,000

On August 1, 2021, the entity declared 15,000 shares as share dividend. On this date, the
shares had a fair value of P90 per share. On November 12, 2021, the entity distributed the
share dividend, and on this date, the shares had a fair value of P100 per share. On December
31, 2021, the net income for the year was P1,600,000. Compute the total retained earnings
balance on December 31, 2021.

3. On January 1, 2021, an entity had the following equity balances:

Share capital, P10 par value per share 2,000,000


Share premium 1,500,000
Retained earnings – unappropriated 3,400,000
Retained earnings - appropriated for treasury shares 600,000
Treasury shares, 20,000 shares at cost 600,000

The following equity transactions occurred during 2021:

 Changed inventory valuation method from FIFO to weighted average. The change
resulted in an increase in beginning inventory of P350,000, net of tax.
 Discovered an understatement of 2020 depreciation expense by P200,000. The after-tax
effect on the 2020 net income was P140,000.
 Formally cancelled all the 20,000 treasury shares which were originally sold at P15 per
share.
 Declared and paid cash dividends at P5 per share
 Net income for the year was P1,500,000.

Compute the retained earnings balance on December 31, 2021.

END

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