Reference no: EM132488525
Question - Cerritos Company began operations on January 1, 2014.
During the first three years of operations, Cerritos Company reported net income of P800,000 for 2014, P2,500,000 for 2015, and P3,000,000 for 2016.
The entity also declared and paid dividends of P1,000,000 for 2015 and P1,000,000 for 2016.
The entity reported the following data for 2017:
Income before income tax 4,800,000
Prior period adjustment-understatement of 2015 depreciation before tax 400,000
Cumulative decrease in income from change in inventory method before tax 700,000
Dividend declared (of this amount, P500,000 Will be paid on January 15, 2018) 2,000,000
Income tax rate 30%
Required -
a) What is the balance of retained earnings on January 1, 2017?
b) What amount should be reported as retained earnings on December 31, 2017?
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