What amount should be reported as retained earnings on dec

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Reference no: EM132794629

Nile Company reported the following amounts in the shareholders' equity on January 1, 2020:

Preference share capital, P75 par value, 20,000 shares 1,500,000;

Ordinary share capital, P25 par value, 100,000 shares 2,500,000;

Share Premium 3,000,000; and

Retained earnings 1,250,000.

Question 1: On January 1, 2020, the entity sold 20,000 additional shares for P45 per share. Late in 2020, it was learned that because of mathematical error, an overstatement of depreciation expense by P250,000 had occurred in 2019. The entity reported net income of P2,000,000 for 2020. The entity declared cash dividend of P500,000 on preference shares and P1,000,000 on Ordinary shares during 2020. The income tax rate is 30%. What amount should be reported as retained earnings on December 31, 2020?

Option 1: 2,225,000
Option 2: 2,925,000
Option 3: 3,000,000
Option 4: 2,575,000

Reference no: EM132794629

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