Problem 30-2 Multiple choice (IFRS)

Universal Company is preparing to adopt IFRS for the first time on December 31, 2020. In preparing its opening statement of financial position on January 1, 2019, the entity identified the following differences between IFRS and its previous GAAP:

a. Under the previous GAAP, the entity had recorded proposed dividends of P500,000 as a current liability. b. Under the previous GAAP, the entity had deferred advertising costs of P4,000,000. c. The entity did not recognize a provision for warranty of P1,500,000 because the concept of constructive obligation was not recognized under the previous GAAP. d. The entity incurred architect fees of P800,000 in the construction of a building which was put into service on January 1, 2018.

Such costs were expensed immediately. The building had a useful life of 40 years.

Required:

1. Prepare the journal entries needed in the preparation of the opening statement of financial position.

2. Compute the net adjustment to equity as a result of the journal entries.