The following events occurred between December 31, 2020 (the reporting date) and March 22, 2021, the date that Kaizza Inc.'s financial statements were approved for issue: 1. January 8, 2021: The local government approved the expropriation of one of the company's manufacturing facilities for construction of a new motorway. On December 31, 2021, the carrying value of the property, land and building, was PhP 27,500,000. The company has determined that they will be able to move most of the manufacturing machines to other facilities. The company was not previously aware of the local government's plan, as the council discussions had been held in camera. The local government has not yet proposed a compensation amount. The appropriation will occur later in 2021. 2. January 27, 2021: The board of directors approved a staff bonus of PhP 2,500,000. The terms of this bonus were included in the employment contracts of key management personnel and the bonus calculation was based on the reported financial results of the December 31, 2020 fiscal year. 3. February 3, 2021: The company received notice from the Bureau of Internal Revenue that additional income taxes of PhP 750,000 for the 2020 and 2021 fiscal years were payable. The company had previously disputed the calcilation of these tayes and bad renorted an accrual PhP 300.000 on Decemher 31 2020
The following events occurred between December 31, 2020 (the reporting date) and March 22, 2021, the date that Kaizza Inc.'s financial statements were approved for issue: 1. January 8, 2021: The local government approved the expropriation of one of the company's manufacturing facilities for construction of a new motorway. On December 31, 2021, the carrying value of the property, land and building, was PhP 27,500,000. The company has determined that they will be able to move most of the manufacturing machines to other facilities. The company was not previously aware of the local government's plan, as the council discussions had been held in camera. The local government has not yet proposed a compensation amount. The appropriation will occur later in 2021. 2. January 27, 2021: The board of directors approved a staff bonus of PhP 2,500,000. The terms of this bonus were included in the employment contracts of key management personnel and the bonus calculation was based on the reported financial results of the December 31, 2020 fiscal year. 3. February 3, 2021: The company received notice from the Bureau of Internal Revenue that additional income taxes of PhP 750,000 for the 2020 and 2021 fiscal years were payable. The company had previously disputed the calcilation of these tayes and bad renorted an accrual PhP 300.000 on Decemher 31 2020
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 39P
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Transcribed Image Text:The following events occurred between December 31, 2020 (the reporting date) and March
22, 2021, the date that Kaizza Inc.'s financial statements were approved for issue:
1. January 8, 2021: The local government approved the expropriation of one of the company's manufacturing
facilities for construction of a new motorway. On December 31, 2021, the carrying value of the property, land
and building, was PhP 27,500,000. The company has determined that they will be able to move most of the
manufacturing machines to other facilities. The company was not previously aware of the local government's
plan, as the council discussions had been held in camera. The local government has not yet proposed a
compensation amount. The appropriation will occur later in 2021.
2. January 27, 2021: The board of directors approved a staff bonus of PhP 2,500,000. The terms of this bonus
were included in the employment contracts of key management personnel and the bonus calculation was
based on the reported financial results of the December 31, 2020 fiscal year.
3. February 3, 2021: The company received notice from the Bureau of Internal Revenue that additional income
taxes of PhP 750,000 for the 2020 and 2021 fiscal years were payable. The company had previously disputed
the calculation of these taxes, and had reported an accrual PhP 300,000 on December 31, 2020.
4. February 21, 2021: The accounts receivable clerk was fired after it was discovered he had perpetrated a fraud
in the accounts. The accounts receivable balance was overstated by PhP 750,000 on December 31, 2020. The
company has consulted legal counsel to determine if any action can be brought to recover the stolen funds,
but no action has yet been filed.
5. March 16, 2021: The board of directors declared a dividend of PhP 5,500,000 based on the results reported
on the December 31, 2020 financial statements.
6. March 18, 2021: A fire completely destroyed one of the company's production machines. It is not expected
that any insurance proceeds will be received on this asset.
Required: Determine what adjustments or disclosures, if any, should be made on the December 31, 2020 financial
statements for the above items.
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