You were engaged by CITY CORPORATION, a publicdy held company whose shares are traded onthe Philippine Stock Exchange, to conduct an audit of its 2020 financial statements. You weretold by the company's controller that there were numerous equity transactions that took place in2020. The shareholders' equity accounts at December 31, 2019, had the following balances:Share capital--Preference, P100 par value, 6% cumulative;9,000 shares authorized; 5,400 shares issuedand outstandingShare capital-Ordinary, P1 par value, 540,000 shares authorized;360,000 shares issued and outstandingShare premiumRetained earningsTotal shareholders' equityP540,000360,000720,000294,000P1.914.000You summarized the following transactions during 2020 and other information relating to theshareholders' equity in your working papers as follows:January 6, 2020- Issued 13,500 ordinary shares in exchange for land. On the date issued,the shares had a market price of P16.50 per share. The land had a carrying value of P126,000.• January 20, 2020 - Issued 10,000 ordinary shares to Atty. A. Santiago as compensation for500 hours of legal services performed. Atty. Santiago usually bills P400 per hour for legalservices. On the date of issuance, the share was trading at P17.• January 31, 2020 - Sold 720, P1,000, 12% bonds due January 31, 2030, at 98 with onedetachable share warrant attached to each bond. Interest is payable annually on January 31.The fair value of the bonds without the share warrants is 95. The detachable warrants havea fair value of P50 each and expire on January 31, 2021. Each warrant entitles the holder topurchase 10 ordinary shares at P10 per share.• February 22, 2020 - Purchased 4,500 of its own ordinary shares to be held as treasuryshares for P24 per share.• February 28, 2020 - Subscriptions for 12,600 ordinary shares were received at P26 pershare, payable 50% down and the balance by March 15.• March 15, 2020 - The balance due on 10,800 ordinary shares was received and thoseshares were issued. The subscriber who defaulted on the 1,800 remaining shares forfeitedthe down payment in accordance with the subscription agreement.• August 30, 2020 - Reissued 1,800 treasury shares for P20 per share.• September 14, 2020 - There were 567 warrants detached from the bonds and exercised.• November 3o, 2020 - Declared a cash dividend of PO.50 per share to all ordinaryshareholders of record December 15, 2020. The dividend was paid on December 30, 2020.• December 15, 2020 - Declared the required annual cash dividends on preference sharesfor 2020. The dividend was paid on January 15, 2021.January 8, 2021 - Before closing the accounting records for 2020, CITY became aware thatno depreciation had been recorded for 2019 for a machine purchased on July 1, 2019. Themachine was properly capitalized at P288,000 and had an estimated useful life of eight yearswhen purchased. The appropriate correcting entry was recorded on the same date.• Adjusted net income for 2020 was P252,000. Based on the foregoing and the result of your audit, answer the following: (Ignoreincome tax implications.)The unappropriated retained earnings on December 31, 2020, isB. P224,965A. P181,765C. P232,165D. P289,765

The closest figure or amount of unappropriate retained earnings of CITY CORPORATION, a public held…

Answered: Based on the foregoing and the result…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Based on the foregoing and the result of your audit, answer the following: (Ignore income tax implications.) The unappropriated retained earnings on December 31, 2020, is B. P224,965 A. P181,765 C. P232,165 D. P289,765