XYZ company began operations on January 1, 2017.

During the first years of operations, XYZ Company reported net income of P1,500,000 for 2017, P2,500,000 for 2018 and P3,000,000 for 2019.

The entity also declared and paid dividends of P1,000,000 for 2018 and P1,000,000 for 2019.

The entity reported the following data for 2020:

Income before Income tax

5,000,000

Prior period adjustment understatement of 2018 depreciation before tax

500,000

Cumulative decrease in income from change in inventory method before tax

1,000,000

Dividend declared (of this amount, P500,000 will be paid on January 15, 2021

2,000,000

Income tax rate

30%

What amount should be reported as retained earnings on December 31, 2020?