Question 20. The amount of provisions that should be recognized at December 31, 2021 is? For the 2021 audit of the financial statements, you are tasked to audit EMPLEOCorporation's liabilities. The following information relates to the obligations ofEMPLEO Corporation as of December 31, 2021:• Accounts payable for goods and services purchased on open account amountedto P350,000 on December 31, 2021. This amount was gross of a supplier's debitbalance of P30,000. On the other hand, the testing of the accounts receivableaccount revealed that a customer's credit balance of P50,000 was netted againstthe balance of the accounts receivable.• At December 31, 2021, EMPLEO declared a cash dividend at PO.50 per share onits P10 par value ordinary share capital, payable at January 12, 2022, toshareholders as of December 31, 2022. At December 31, 2021, EMPLEO had1,000,0000 issued ordinary shares and 800,000 oustanding ordinary shares.• The company financed its receivables, dated November 1, 2021, by discountingits 180-day P400,000 accounts receivable to a bank on a with recourse basis at8% on December 31, 2021.• On December 31, 2021, the company purchased a machinery. The purchase wasdone on a deferred payment basis. The payment terms require a P100,000 downpayment and the balance with a note payable in four equal annual installments ofP250,000 every December 31 starting 2022. The interest rate for similar notes is10%.• The review of minutes and confirmation letter obtained from the legal counsel ofthe company revealed the following information:o EMPLEO has been named a liable party for toxic waste cleanup on its land,and must pay an as-yet undetermined amount for environmental remediationactivities.An adjoining land owner, Clear Toothpaste Company, sold its propertybecause of possible toxic contamination of the water supply and resultingpotential adverse public reaction towards its product. Clear Toothpaste suedEMPLEO for damages. There is reasonable possibility that Clear Toothpastewill prevail and be awarded between P250,000 and P600,000. o EMPLEO is also the defendant of a lawsuit on an incident involving anaccidental crash by its company car to another vehicle. In your inspection ofthe letter obtained from its legal counsel, they believe that the companywould be liable to pay damages amounting to P300,000, but it is also possiblethat it will pay up to P500,000.

Provisions in Accounting Provisions which are made in the accounting is to make the estimation in…

Answered: Question 20. The amount of provisions…

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Question 20. The amount of provisions that should be recognized at December 31, 2021 is?

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter15: Audit Reports For Financial Statement Audits

Section: Chapter Questions

Problem 10RQSC

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For the 2021 audit of the financial statements, you are tasked to audit EMPLEO Corporation’s liabilities. The following information relates to the obligations of EMPLEO Corporation as of December 31, 2021: Accounts payable for goods and services purchased on open account amounted to P350,000 on December 31, 2021. This amount was gross of a supplier’s debit balance of P30,000. On the other hand, the testing of the accounts receivable account revealed that a customer’s credit balance of P50,000 was netted against the balance of the accounts receivable. At December 31, 2021, EMPLEO declared a cash dividend at P0.50 per share on its P10 par value ordinary share capital, payable at January 12, 2022, to shareholders as of December 31, 2022. At December 31, 2021, EMPLEO had 1,000,0000 issued ordinary shares and 800,000 oustanding ordinary shares. The company financed its receivables, dated November 1, 2021, by discounting its 180-day P400,000 accounts receivable to a bank on a with…
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