Problem 1
You were hired by SUNSHINE TEXTILE, INC. for the year ended December !, "##$. The Com%any Com%any wa& new'y new'y incor%or incor%orated ated on December December !(, "##) "##) a& a di&tributo di&tributorr and retai'er of te*ti'e& and other re'ated acce&&orie&. It &tarted it& commercia' o%eration& on +anuary !, "##$ in a &ma'' rented bui'din which i& bein u&ed a& office &tore &%ace 'ocated in the centra' of -aati. You were %ro/ided with the document& %ertainin to the orani0ation of the com%any which inc'ude inc'ude artic'e& artic'e& of incor%ora incor%oration, tion, by1'aw&, 'i&t of director director& & and officer&, officer&, and other other re'ated re'ated document&. You are now re/iewin the worin %a%er& %re%ared by your audit &taff. The&e contain draft& of financia' &tatement&. 2na'y&e& and &chedu'e&, a& we'' a& audit findin& which may re3uire audit ad4u&tment& to arri/e at the fina' financia' &tatement& a& of December !, "##$. 2 &ur%ri&e count of ca&h and ca&h item& wa& conducted by your audit &taff on +anuary !, "#!#. The com%any ha& a %etty ca&h fund of 5(,### which i& maintained on an im%re&t ba&i&. The ca&h count &heet di&c'o&ed the fo''owin6 5etty ca&h Currencie& Coin& 5aid %etty ca&h /oucher&6 7/ertime %ay of &ome em%'oyee& 8e%air of com%uter& 8e%re&entation and ad/erti&in e*%en&e& 5o&tae &tam%& and office &u%%'ie&
5!),#$( "( (,(## 9,"(# ,$:# ",);#
Sun&hine Te*ti'e maintain& &a/in& and current account& with Ea&t
2 debi debitt memo memo date dated d Dece Decemb mber er "$, "$, "##$ "##$ for for 59!" 59!",( ,(## ## wa& wa& inc' inc'ud uded ed in the ban ban &tatement for the month of December. Thi& re%re&ent& %ayment of a &hort1term ranted by Ea&t
".
=anco de 7ro returned returned a cu&tom cu&tomer>& er>& chec chec for for 5!!,( 5!!,((# (# on on Decemb December er ") ") for for in&uffici in&ufficiency ency of fund&. Thi& wa& &ub&e3uent'y rede%o&ited and c'eared by the ban on +anuary 9, "#!#.
.
2 tran& tran&fe ferr of fund& fund& from from =anco =anco de 7ro 7ro to Ea&t Ea&t
9.
2 &ta'e &ta'e chec chec of of 5;,)# 5;,)# which which ha& ha& been been out&ta out&tandi ndin n for than than &i* &i* month& month& wa& wa& inc'u inc'uded ded in in the 'i&t of out&tandin chec&. Thi& wa& in %ayment& of account& %ayab'e.
(.
Se/e Se/era ra'' de%o de%o&i &it& t& made made in Decem Decembe ber, r, "##$ "##$ co/e co/ere red d by ban ban /a'id /a'idat ated ed de%o& de%o&it it &'i%& &'i%& tota'in 5,9## were not recorded. The&e re%re&ent co''ection& from cu&tomer& who&e account& are current.
;.
Unre Unre'e 'ea& a&ed ed chec chec& & tota tota'i 'in n 5"), 5"),$ $(# %aya %ayab' b'e e to &u%% &u%%'i 'ier er& & wer were inc' inc'ud uded ed amon amon out&tandin chec&. The&e were de'i/ered on +anuary ;, "#!#.
:.
Inte Intere re&t &t co''ec co''ecti tion on from from matu maturi rin n T1bi'' T1bi'' %'ac %'acem emen entt amou amount ntin in to 5!," 5!,";# ;# which which wa& de'i/ered in the afternoon of December ! wa& not de%o&ited on the &ame day and neither recorded.
The &chedu'e of account& recei/ab'e furni&hed to you by the accountant ref'ect& &ome error&. The tota' fiure& in the &chedu'e do not tota''y with the ba'ance %er enera' 'eder. =a&ed on your re/iew of &a'e& in/oice&, %urcha&e order&, and other re'ated document&, you noted the fo''owin information6 !.
Sa'e& on account of /ariou& acce&&orie& tota'in 5;,9)# were returned by the cu&tomer on December "), "##$, but no entry wa& made in the boo&. The ood& were inc'uded in the year1end %hy&ica' count.
".
=a&ed on the findin& %er confirmation re%'y from a cu&tomer, he indicated that he ha& a'ready %aid hi& account of 5",$)# in 7ctober, "##$. Your /erification di&c'o&ed that &aid co''ection wa& credited to &a'e& account.
.
Co''ection of 5!",$(# on No/ember (, "##$ from Dina Cor%oration wa& credited to the account of Diman Cor%oration.
9.
2 &a'e& in/oice for 5",9:# wa& %re%ared on No/ember "$, "##$ for /ariou& te*ti'e materia'& ordered by De ?au'e @a&hion of Cebu City in No/ember but &hi%%ed on'y on +anuary ;, "#!# on @7= &hi%%in %oint. Said in/oice wa& not recorded a& of December !, "##$.
(.
2d/ance& to affi'iate&, officer&, and &taff tota'in 5!#),### were a'&o inc'uded in the &chedu'e. The&e ad/ance& are co''ectib'e in "###.
Sun&hine &et u% a %o'icy of %ro/idin a''owance for doubtfu' account& e3ui/a'ent to "A of the out&tandin account& recei/ab'e at the end of the %eriod. 2& of December !, "##$, no a''owance &et u% in the record&. Sun&hine ranted a &hort1term 'oan of 5)(#,### to a &ub&idiary. 2 %romi&&ory note wa& %re%ared with intere&t at !(.(A %er annum, /a'ue dated on No/ember "), "##$ and maturin after $# day&. 7n December ":, "##$, a %artia' %ayment of %rinci%a' of 59##,### %'u& corre&%ondin intere&t wa& made. No accrua' wa& made a& of year1end. 2 %hy&ica' in/entory wa& conducted &imu'taneou&'y in the &tore and the warehou&e in the %re&ence of your audit &taff. Your re/iew di&c'o&ed the fo''owin information6 !.
Certain %urcha&e& of te*ti'e materia'& amountin to 5!(,### were a'ready %aid and recorded but the &ame ha/e not been recei/ed a& of date of count. =a&ed on the document& %re&ented, the&e were &hi%%ed by the &u%%'ier on @7= &hi%%in %oint on December "), "##$.
".
Shi%%in and other chare& on &ome item& %urcha&ed amountin to 5"!,## were chared to e*%en&e&. The re'ated in/entorie& were a'ready inc'uded in the %hy&ica' count.
.
Se/era' in/entory item& ordered from a &u%%'ier on @7= de&tination in 'ate December tota'in 5!9#,(## were recei/ed on'y on +anuary "!, "#!#. No %ayment wa& made yet a& of year1end.
9.
2 &u%%'ier& in/oice for 5),"## worth of te*ti'e materia'& dated December "#, "##$ wa& recei/ed throuh the mai'& on December "$, "##$. The ood& were &hi%%ed on December ";, but the ood& arri/ed on'y on +anuary (, "#!#. Shi%ment term& are @7= &hi%%in %oint whi'e %ayment term& are !( day&. The ood& were not inc'uded in the year1end %hy&ica' count.
You were furni&hed with the &chedu'e of account& %ayab'e and accrued e*%en&e& a& of December !, "##$. Your /erification di&c'o&ed the fo''owin6
!.
2 de%o&it to a &u%%'ier for /ariou& merchandi&e ordered amountin to 59(,### wa& inc'uded in the &chedu'e. ". 5ayment to Ser& Com%any amountin to 5!",### wa& erroneou&'y debited to the account of E'don Cor%oration . 2d/ance& from an officer amountin 5((,### wa& ref'ected a& account& %ayab'e. The fo''owin un%aid /oucher& ha/e not been recorded a& of year1end !. 5urcha&e& of te*ti'e materia'& worth 5$(,## which were a'ready de'i/ered and inc'uded in the year1end %hy&ica' count but term& are for # day&. ". . 9.
2ent&> commi&&ion& for the month of December tota'in 5;",;"#. Liht and water bi''& for December tota'in 59",)##. 8e%re&entation and other ad/erti&in e*%en&e& tota'in 5),"##.
Draft of @inancia' Statement %re%ared by the Com%any contained the fo''owin information6 5etty Ca&h @und Ca&h 2ccount& recei/ab'e B trade 2''owance for bad debt& Note& 8ecei/ab'e Intere&t 8ecei/ab'e In/entorie& 2ccount& %ayab'e 2ccrued e*%en&e&
(,### (!#,### ",#$,### 1 9(#,### 1 9,"#,### 9$(,### 9;,###
ue&tion&6 =a&ed on the information abo/e and a'' the nece&&ary ad4u&tin entrie& determine the audited ba'ance& at December !, "##$ of the fo''owin6 !. a.
5etty Ca&h @und 5 (,### b. 5 "",;:#
c. 5 !),9"#
d. 5 !;,()#
a.
Ca&h 5 (!#,###
c. 5 !;),$#
d. 5 !$,99#
a.
2ccount& 8ecei/ab'e ro&& 5 ",#$,### b. 5 ","";,;$#
c. 5 ",!!:,)$#
d. 5 ",!9!,;#
a.
2''owance for doubtfu' account& 5 9;,!)# b. 5 99,(# c. 5 9",)#
d. 5 9",;#
a.
Note& and 8e'ated Intere&t 8ecei/ab'e 5 9;),!!( b. 5 9(;,$( c. 5 9(#,::(
d, 5 9(#,###
".
.
9.
(.
;.
b. 5 ")),$#
c. 5 9,")$,(##
d. 5 9,"#,###
a.
In/entorie& 5 9,99",(## b. 5 9,),### 2ccount& %ayab'e 5;(9,")# b. 5 ;#$,")#
c. 5 ((,#
d. 5 9$(,###
a.
2ccrued e*%en&e& 5 "(9,9!# b. 5 !($,;"#
c. 5 !9#,:$#
d. 5 9;,###
a. :.
).
Problem 2
You were hired by Fictory Com%any to e*amine their account& for the year ended December !, "##) and the fo''owin are the item& di&c'o&ed in your audit of the ca&h account&6
2. 2 &ur%ri&e count of ca&h and ca&h item& wa& conducted by your audit &taff on +anuary 9, "##$. The com%any ha& a %etty ca&h fund of 5:#,### which i& maintained on an im%re&t ba&i&. The ca&h count &heet di&c'o&ed the fo''owin6 =i''& and coin& I7U note& of &e/era' em%'oyee& a'' dated Dec. "##) 5aid %etty ca&h /oucher& unre%'eni&hed
"9,"(# !),### "(,:(#
=. The com%any maintain& account& with =D7 and you were i/en a co%y of the ban reconci'iation &tatement which &howed the fo''owin6 =a'ance %er ban 2dd6 De%o&it& in tran&it =an debit memo& =an error Le&&6 7ut&tandin chec& =oo error =a'ance %er boo&
!,!9,;)# ":",(## ((#,### :",### ((",:;# !),### !,;),9"#
You further ana'y&i& ref'ected the fo''owin6 !. 2 chec for 5$#,### recei/ed from a cu&tomer had been de%o&ited and then returned by the ban on December ";, "##). No entry wa& made for the returned chec. The cu&tomer re%'aced the chec on +anuary !(, "##$. ". 2mon the chec& returned with the ban &tatement i& a chec i&&ued by the com%any in %ayment of account& %ayab'e for 5$#,;## but wa& recorded in the boo& a& 5!#),;## and a chec i&&ued by 8hinna Ltd. for 5:",### incorrect'y chared by ban. . 5o&tdated chec& tota'in 5!9,;## were inc'uded in the de%o&it& in tran&it. The&e re%re&ent co''ection& of account& recei/ab'e from cu&tomer&. The chec& were actua''y de%o&ited on +anuary ), "##$. 9. Fariou& ban debit memo& for draft& %urcha&ed for %ayment of im%ortation of com%uter& tota'in 59;#,### were not yet recorded. The&e %urcha&e& were %re/iou&'y &et u% a& account& %ayab'e. Said com%uter& arri/ed in December "##). (. Inc'uded in the out&tandin chec& are chec& in %ayment of account& %ayab'e for 5"#,###. The&e chec& were %re%ared and recorded in December "##), but not re'ea&ed unti' +anuary !#, "##$. ue&tion&6 ).
$.
U&in the ad4u&ted ba'ance method in %re%arin ban reconci'iation &tatement, how much i& the net ad4u&tment to the ba'ance %er banG a. 5 (",### b. 5 9;,;## c. 5 "#),";# d. 5 !!",);#
!#.
U&in the ad4u&ted ba'ance method in %re%arin ban reconci'iation &tatement, how much i& the net ad4u&tment to the ba'ance %er boo&G a. 5 (",### b. 5 9;,;## c. 5 "#),";# d. 5 !!",);#
!!.
!".
2n auditor &hou'd trace ban tran&fer& for the 'a&t %art of the audit %eriod and fir&t %art of the &ub&e3uent %eriod to detect whether a. The ca&h recei%t& 4ourna' wa& he'd o%en for a few day& after the year1 end. b. The 'a&t chec& recorded before the year end were actua''y mai'ed by the year1end. c. Ca&h ba'ance& were o/er&tated becau&e of itin. d. 2ny unu&ua' %ayment& to or recei%t& from re'ated %artie& occurred.
Problem 3
You are auditin the ca&h account of H2NS7N -E8CH2NDISIN? a& of the fi&ca' year ended 7ctober !,"##: and di&co/ered the fo''owin information6 a.
The ban &tatement a& of 7ctober ! &howed a ba'ance of 5;,;").(.
b.
8ecei%t& tota'in to 5"#,((# from 7ctober "$ to 7ctober ! were de%o&ited on No/ember ".
c.
Han&on>& account wa& debited on 7ctober "( for a cu&tomer>& unco''ectib'e chec amountin to 5,9"$.
d.
The com%any and the ban recorded a cu&tomer chec at 5!,):( wherea& the correct amount &hou'd ha/e been 5",!:(. The ban di&co/ered the error and corrected the &ame %re&entin the correction a& a credit for the %eriod.
e.
=an &er/ice chare& for the month of 7ctober i& at 5!!)."$.
f.
2 1month, $ A 5$,### c u&tomer>& note d ated + u'y " (, d i&counted o n Se%tember !", wa& di&honored 7ctober "; and the ban chared Han&on 5$,""#, which inc'uded a %rote&t fee of 5!:.(#.
.
Chec no. ;;! for 5,:":.(# wa& entered in the ca&h di&bur&ement boo at 5,"::.(# and chec no. ;(" for 5$).:# wa& entered a& 5$):. The com%any u&e& the /oucher &y&tem of recordin di&bur&ement&.
h.
2 ban memo &tated that Linda Com%any>& note for 5:,(## and intere&t of 5!):.(# had been co''ected on 7ctober "), and the ban chared 5:.(#.
i.
U%on your in/e&tiation, the fo''owin chec& remained out&tandin a& of 7ctober !6 No. No. No. No. No.
;"#. ;"!. ;". ;;$. ;:#.
5 ,:(#.## !#,99.;$ :,"!(.:( (,";.!9 ",$::.(#
No. ;:!. No. ;:(. No. ;:$.
",:;!."# )":.!; ;,;$$.9(
Chec ;:# ha& been certified by the ban ue&tion&6 !.
& ca&h accountG a. ,(#".$ b. ,)#".$ c. 9,:).$$ d. 9,;:).$$
.
