PROBLEM 3 Miclef Inc. is a public enterprise whose shares are traded in the over-the counter market. At December 31, 2020, Miclef had 6,000,000 authorized shares of P10 par value ordinary shares, of which 2,000,000 shares were issued and outstanding. The shareholders' equity accounts at December 31, 2020, had the following balances: Ordinary shares Additional paid-in capital Retained Earnings P20,000,000 7,500,000 6,470,000 Transactions during 2021 and other information relating to the shareholders' equity accounts were as follows: a. On January 5, 2021, Miclef issued at P54 per share, 100,000 shares of P50 par value, 9% cumulative convertible preference shares. Each share of preference is convertible, at the option of the holder, into two ordinary shares. Miclef had 600,000 authorized preference shares. b. On February 1, 2021, Miclef reacquired 20,000 of its ordinary shares for P16 per share. Miclef uses the cost method to account for treasury shares. c. On April 30, 2021, Miclef sold 500,000 shares (previously unissued) of P10 par value ordinary shares to the public at P27 per share. d. On June 18, 2021, Miclef declared a cash dividend of P1 per ordinary share, payable on July 12, 2021, to shareholders of record on July 1, 2021. e. On November 10, 2021, Miclef sold 10,000 treasury shares for P21 per share. f. On December 14, 2021, Miclef declared the yearly cash dividend on preference shares, payable on January 14, 2022, to shareholders of record on December 31, 2021. g. On January 20, 2022, before the books were closed for 2021, Miclef became aware that the ending inventories at December 31, 2020, were understated by P300,000 before income tax. The appropriate correcting entry was recorded the same day. h. After correcting the beginning inventory, income before tax for 2021 was P5,200,000. Required: 1. Prepare a statement of retained earnings for the year ended December 31, 2021. 2. Prepare the shareholders' equity section of Miclef at December 31, 2021.