University of the Visayas Applied Auditing Quiz no:______ Problem 1 In your initial audit of Bulls Finane !o., !o., you find the following ledger account balances. 12%, 25-year Bonds Payable, 2001 issue 01/01/200 !"
10/01/2012
!
$reasury Bonds P 21#,000
Bond Pre&iu& 01/01/200
01/01/2012 0+/01/2012
! !
P 1,#00,000
!"
P 0,000
Bond Interest '()ense P *#,000 *#,000
$he bonds were redee&ed for )er&anent cancellation on ctober 1, 2012 at 105 )lus accrued interest. QUESTIONS:
Based on the aboe and the result of your audit, deter&ine the following 1.
2.
.
.
$he $he ad adus uste ted d bal balan ance ce of bond bonds s )ay )ayab able le as of ece ece&b &ber er 1, 1, 201 2012 2 is is a. P1,00,000 b. P1,#00,000 c. P1,000,000
d.
$he $he una una&o &ort rti ied ed bond bond )re& )re&iu iu& & on on ec ece& e&be berr 1, 1, 2012 2012 is a. P0,000 b. P#,000
c. P5#,000
d. P5,00
$he $he tot total al bond bond inte intere rest st e()e e()ens nse e for for the the ye year 2012 2012 is a. P1*,100 b. P12,*00
c.
P1,00
d.
P12,00
$he ga gain or los loss s on on )a )arti rtial bon bond d red rede& e&) )tion tion is a. P1,*00 loss b. P1 P1,*00 gain
c.
P 1,100 loss P1
d.
P 1,100 gain P1
P1,,000
Problem " In connection connection with your audit of #inebra !orporation !orporation 3s financial state&ents for the year 2012, you noted the following liability account balances as of ece&ber 1, 2011 4ote )ayable, ban 6iability under finance lease eferred inco&e ta(es
P 5,#00,000 0,000 +00,000
$ransactions $ransactions during 2012 and other infor&ation relating to 7inebra3s liabilities were as follows a.
$he )rinci)a )rinci)all a&ount a&ount of the note )ayabl )ayable e is P5,#00,00 P5,#00,000 0 and bears bears interest interest at 12%. $he note note is dated 8)ril 8)ril 1, 2011 2011 and is )ayable in four e9ual annual install&ents install&ents of P1,00,000 beginning 8)ril 1, 2012. $he first )rinci)al and interest )ay&ent was was &ade on 8)ril 1, 2012.
b.
$he ca)itali ca)italied ed lease lease is for a ten-year ten-year )eriod beginni beginning ng ece&ber ece&ber 1, 1, 200*. '9ual '9ual annual )ay&e )ay&ents nts of P100,000 P100,000 are due due on ece&ber 1 of each year, and the 1% interest rate i&)licit in the lease nown by 7inebra. $he )resent alue at ece&ber 1, 2011 of the seen re&aining lease )ay&ents :due ece&ber 1, 2012 through ece&ber 1, 2011; discounted at 1% was P0,000.
c.
efer eferred red inco&e inco&e ta(es ta(es are )roide )roided d in recog recognit nition ion of ti&ing ti&ing differen differences ces betwee between n financ financial ial and inco&e inco&e ta( re)ort re)orting ing of de)reciation.
d.
n =uly 1, 2012, 2012, 7inebra 7inebra issued issued for P1,++,0 P1,++,000, 00, P2,000, P2,000,000 000 face face a&ount a&ount of its 10%, P1,000 P1,000 bonds. bonds. $he Bonds Bonds were issued issued to yield 12%. $he bonds bonds are dated =uly 1, 2011 and will &ature on =uly 1, 2021. Interest Interest is )ayable )ayable annually annually on =uly 1. 7inebra uses the interest ðod to a&ortie bond discount.
QUESTIONS:
Based on the aboe and the result of your audit, deter&ine the following 1. 6iability under finance lease as of ece&ber 1, 2012 a. P1,#00 b. P*0,200
c.
P,2
d.
2. $otal noncurrent liabilities as of ece&ber 1, 2012 a. P5,#10,0 b. P5,++0,#0
c.
P5,*1,2
d. P5,+25,2#
P0,000
. !urrent )ortion of long-ter& liabilities as of ece&ber 1, 2012 a. P1,5,+2 b. P1,00,000 c. P1,500,000
d.
. 8ccrued interest )ayable as of ece&ber 1, 2012 a. P,0 b. P2,#2
c.
P52,#2
d. P+,000
5. $otal interest e()ense for the year 2012 a. P#52,0 b. P+0+,0#
c.
P+12,#0
d. P#**,+#0
P1,#,5+#
P$%B&'( )%* + n =anuary 2, 2011, the ,uns- .n* issued P2,000,000 of % conertible bonds at )ar. $he bonds will &ature on =anuary 1, 2015 and interest is )ayable annually eery =anuary 1. $he bond contract entitles the bondholders to receie # shares of P100 )ar alue co&&on stoc in e(change for each P1,000 bond. n the date of issue, the )reailing &aret interest rate for si&ilar debt without the conersion o)tion is 10%. n ece&ber 1, 2012, the holders of the bonds with total face alue of P1,000,000 e(ercised their conersion )riilege. addition, the co&)any reac9uired at 110, bonds with a face alue of P500,000. $he balances in the ca)ital accounts as of ece&ber 1, 20011 were !o&&on stoc, P100 )ar, authoried 50,000 shares, issued and outstanding, 0,000 shares Pre&iu& on co&&on stoc
P,000,000 500,000
>aret alue of the co&&on stoc and bonds were as follows ate ece&ber 1, 2011 ece&ber 1, 2012
Bonds 11 110
!o&&on stoc 0 2
QUESTIONS:
Based on the aboe and the result of your audit, answer the following 1. a.
?ow &uch of the )roceeds fro& the issuance of conertible bonds should be allocated to e9uity@ P#,000 b. P12#,1# c. P221,## d. P0
a.
?ow &uch is the carrying alue of the bonds )ayable as of ece&ber 1, 2011@ P2,000,000 b. P1,*,00 c. P1,+*#,1+0 d. P1,*00,502
a.
?ow &uch is the interest e()ense for the year 2012@ P1#0,000 b. P1,*0 c. P1+*,#1+
a.
$he entry to reco rd the conersion on ece&ber 1, 2012 wi ll include a credit to 8PI! of P#5,2+# b. P00,000 c. P0+,* d. P0
a.
P50,000
2.
.
.
5.
?ow &uch is the loss on bond reac9uisition on ece&ber 1, 2012@ b. P*#,05 c. P#+,#2 -end-
d. P1*0,050
d.
P0
In
