AUDITING PROBLEMS COMPREHENSIVE EXAMINATION
Instruction:
For each of the following following items, items, write the capital letter letter of the best answer answer among the choices on the attached attached answer answer sheet. No credit will be given for answers answers with erasures or answers written in pencil.
Problem I In connection with your audit of the Queen Company for the year ended December !, "##$, you gathered the following data% Currency and coins on hand Current account & 'etroban( )avings account & Citiban( Current account & *nionban( -llied an( an( current account No. #! -llied an( an( current account No. #" /ime deposit at PN & # days Certificate of deposit & PI Payroll ban( account & PI /raveler3s chec( 'anager3s chec( *ndelivered company chec( Postdated chec( issued Postdated chec( received 'oney orders Petty cash fund +P4,### in currency and e5pense receipts for P1,### Customers Not )ufficient Funds +N)F chec(s 6mployee3s post7dated chec( l.8.*. from a company officer Credit memo from a vendor for a purchase return - chec( drawn drawn by a supplier supplier dated Dec. "1, "1, "##$ for for goods returned returned by the Company /7bills, due 'arch !, "#!# +purchased Dec. !, "##$ /7bills, due :an. !, "#!# +purchased :an. !, "##$ Fund for the retirement of long7term debt +includes /7bills amounting to P",###,### Pension fund Foreign ban( account & restricted +in peso e;uivalent )avings deposit in a closed ban( +fully insured by the PDIC Customer3s Customer3 s chec( outstanding for !1 months
#,### ,###,### !,###,### +!##,### !,!##,### !,!##,### +!##,### +!##,### 0##,### 1##,### 2##,### "#,### !##,### !#,### 2,### 4#,### "",### !",### "2,### 2,### ,### !#,### ",### 9##,### 2##,### ",2##,### ,###,### !,2##,### "##,### ,### !,!##,### !,2##,### 2##,###
ased on the above data and the result of your audit, determine the following% !. Correct Correct cash cash balan balance ce at Decembe Decemberr !, "##$% "##$% a. 9,"44,### c. 2,044,### b. 2,$"!,### d. 2,"!!,### ". Correct Correct cash cash e;uiva e;uivalent lents s at Decemb December er !, !, "##$% "##$% a. 4,!##,### c. ",!##,### b. ,##,### d. !,##,### Problem II In connection with your audit of Den Company, you gathered the following information% Petty cash fund Payroll account & an( -
!#,### 2##,###
1
Dividend fund & an( =alue7added ta5 account & an( Cash in sin(ing fund +earmar(ed for the payment of onds payable maturing ne5t year Change fund Pension fund Interest fund & an( Contingent fund & an( Fire insurance fund & an( Cash surrender value of life insurance Compensating balance & restricted as to withdrawals +pertains to a short7term loan
4##,### "2#,### ",###,### ,### 4,###,### !2#,### !,2##,### !",### !,411,### !2#,###
. ased on the above data, the correct cash balance to be reported at December !, "##$ statement of financial position should be% a. !,49,### c. !,"2,### b. ,"2,### d. !,!,### Problem III In connection with your cash audit of the )heila Company for the year ended December !, "##$, you gathered the following% /ime of deposit & Premyo an( !"#7day Certificate of deposit & < an( /emporary investment in ordinary shares of /riple Company +purchased on December !2, "##$ and intended to be sold within three months from date of purchase /emporary investment in non7redeemable preference shares of )ingle Company +purchased on December !2, "##$ and intended to be sold within three months from date of purchase $#7day /ime deposit & >8> an( +used as collateral for a 27year ban( loan /7bills purchased on :uly !, "##$ +will mature within three months from balance sheet date
4##,### "2#,###
9##,###
##,### "##,### 2##,###
4. -s a result of your audit, the correct cash e;uivalents at December !, "##$ should be% a. 4##,### c. !,###,### b. 0##,### d. !,##,### Problem I= /he following are the cash items of 6' Corporation as of December !, "##$% Deposit at 'etroban( & restricted for purchase of e;uipment Current account & Chinaan( 8utstanding chec(s )avings account & PI Compensating balance & 'etroban( +unrestricted as to withdrawal
,###,### "2#,### "$#,### 2##,### "2#,###
/he compensating balance represents !#? of the short7term loan from 'etroban(. 2. /he cash balance to be shown on the statement of financial position of 6' Corporation as of December !, "##$ should be% a. 2##,### c. 02#,### b. 0!#,### d. !,###,### Problem = 9. ased on the following information as of December !, "##$, compute the correct balance of -ccounts
1##,### !##,### 02,### "2,###
2
Notes payable & ban( Credit balance in a debtor3s account Debit balance in a supplier3s account a. 9$#,### b. "2,###
##,### 2,### !#,### c. !2,### d. "$#,###
Problem =I 8n November !2, "##$, Nora Company sold merchandise to =ilma Company. =ilma issued a P!,###,###, $#7day, !"? interest bearing note dated November !2, "##$. 8n December !2, "##$, Nora discounted the note at 'oney7'oney an( Company at !2? discount rate. Nora informed =ilma regarding the discounting arrangement. 8n maturity date, =ilma dishonored the note and as a result 'oney7'oney an( charged Nora Company for the total amount due plus P0,2## protest fee. 0. -s a result of the above transactions, the amount of Nora3s debit to accounts receivable account should be% a. !,##,### c. !,!"0,2## b. !,#0,2## d. !,##0,2## Problem =II /he following information has been e5tracted from the boo(s of accounts of PabA, Inc. for the year ended December !, "##$% Net sales for "##$ /otal receipts from customers Collection of accounts receivables -ccounts receivable, :an. !, "##$ Doubtful accounts e5pense +:une #, "##$ -llowance for doubtful accounts, :an. !, "##$
,9##,### ,42#,### ",!##,### 02#,### 2,### 0,2##
1. /he
-dditional information% Doubtful accounts is based on 2? of -ccounts
•
Problem =III ou were engaged by )arah Corporation to audit its financial statements for "##$. /he business of the Corporation, as provided in its -rticles of Incorporation, is buying and selling of household appliances. In the course of the audit, the following inventory7related items were provided by the boo((eeper of the client as of December !, "##$% @oods on hand +based on physical count of inventory items under )arah3s possession @oods out on consignment, including P!,### freight7out to consignees @oods being held on consignment by the client @oods out on consignment already sold by the consignee @oods in the hands of salesmen @oods held by customers on approval @oods on hold for shipping instruction @oods in transit and sold F8 destination @oods in transit and purchased F8 shipping point @oods in transit and sold F8 shipping point @oods in transit and purchased F8 destination @oods pledged against borrowings
4##,### 4#,### !",### 9,### ",### ,### !,### $,### 0,### 9,### 1,### !#,###
$. /he correct inventory balance that should appear among current assets in the statement of financial position as of December !, "##$ should be%
3
a. 40",### b. 492,###
c. 42$,### d. 49#,###
Problem I urgundy Company3s inventory records showed the following information for the year "##$% @oods on hand +based on physical count of inventory items in the premises of the Company @oods under special orders but not yet shipped @oods sold on installment +subBect to repossession in case of default @oods in transit & purchased F8 destination @oods in transit & sold F8 shipping point @oods in transit & sold F8 destination +special order @oods in transit & paid by the buyer on December "0, "##$
##,### $,### 1,### 0,### 9,### 2,### 2,###
!#. /he correct amount of inventory at December !, "##$ is% a. "$!,### c. ##,### b. "$9,### d. #4,### Problem our client, Eeart /rading Corporation, re;uests your assistance in determining the amount of loss and in filing an insurance claim in connection with a fire on :une !2, "##$ that destroyed some of the companys inventory and accounting records. ou were able to obtain the following information from available records% a. /he last physical inventory was ta(en on December !, "##1. -t that time, total inventory +at cost amounted to P"!#,01$.1#. b. /he annual premium of PI,44# on the insurance carried was due and paid on -pril !, "##$. /he policy, which has a face amount of P!22,### carries an 1#? coinsurance clause. c. -ccounts payable were P!!#,!#9.4! on December !, "##2 and P!"9,$42.0 at the time the fire occurred. d. Payments to vendors from December !, "##1 to the date of the fire totaled P94!.10!.29. e. -ll sales are on account and accounts receivable were P!2,##$.!1 at December !, "##1 and P!#0,!42."2 at the date of the fire. f. Collections on receivables from December !, "##1 to the date of the fire amounted to P109,!$2.2#. g. -lmost all the merchandise items are sold at appro5imately #? in e5cess of cost. -s at :une !2, "##$, the total cost of inventory items not destroyed by the fire amounted to P!44,11".. ased on the above information, determine the following% !!. /he amount of recovery due from the insurance company. a. 1",$42 c. 20,944 b. 9,24 d. 0",#22 !". /he amount of loss incurred by Eeart /rading Corporation as a result of fire. a. 0,0#! c. 0",#22 b. 1,14" d. # Problem I 8n )eptember !2, "##$, a fire damaged the warehouse of
P 022,### 442,### ",00#,### 4
Collection of accounts receivable, :an. ! & )ept. !2 -ccounts receivable, :an. ! -ccounts receivable, )ept. !2 )alvage value of inventory @ross profit ratio
4,"#,### 2#,### 2#,### !2,### "?
!. /he estimated inventory before fire loss is% a. "#,9## c. "#1,9## b. "",9## d. "!,4## Problem II Indigo Company was organiAed on :anuary !, "##1. 8n December !, "##$, the company lost most of its inventory in a warehouse fire Bust before the year7end count of inventory was to ta(e place. /he companys records disclosed the following data% "##1 Inventory, :anuary ! Purchases Purchase returns and allowances )ales )ales returns and allowances
# 19#,### 49,!"# 011,### !9,###
"##$ "#4,### 9$",### 94,9## 19,### "#,###
8n :anuary !, "##$, )har(s pricing policy was changed so that the gross profit rate would be ? higher than the one earned in "##1. )alvaged undamaged merchandise was mar(ed to sell at P"4,### while damaged merchandise mar(ed to sell at P!9,### had an estimated realiAable value of P,9##. !4. ased on the above information, the inventory balance to be reported on the statement of financial position at December !, "##$ is% a. #,### c. "0,9## b. "!,14# d. "",1## Problem III ou were engaged by =iolet 'anufacturing Company to audit its financial statements for "##1. our audit of =iolet3s inventory revealed that the ending raw materials inventory of amounted to P42,### as of December !, "##1. /his total includes an item of raw material +material Pri5 with a cost of P!##,### with an estimated net realiAable value of P1#,###. Immediately after the balance sheet date, material Pri5 was applied to production and the cost of the finished product where material Pri5 was applied revealed that its net selling price e5ceeds the cost of producing the finished goods. !2. -s of December !, "##1, what amount of raw materials inventory should =iolet 'anufacturing Company reportG a. "42,### c. "2,### b. "92,### d. 42,### Problem I=
Qty. !2,### !9,### !0,### !1,###
*nit Cost P1# 02 1! 1"
8n :une #, "#,### units were on hand with a total value of P!,91,###. Pac(age has always used a periodic FIF8 inventory costing system. @ross profit on sale for :une was 5
P",20",###. @ross profit on sales represents 2? of net sales.
*nits 4#,### !#,### "0#,###
Costs P!,2#,### !,9!",### !,2$,###
*nits "##,### "$#,### "9#,###
)ales )ales
-ll units produced in a given year are assigned the same average cost. !0. /he gross profit in "##1 using FIF8 cost flow should be% a. 1#1,### c. $9$,### b. 1",### d. !,4#",### Problem =I /roll Company, owner of a trading company, engaged your services as auditor. /here is a discrepancy between the companys income and the sales volume. /he owner suspects that the staff is committing theft. ou are to determine whether or not this is true. our investigations revealed the following% a. Physical inventory, ta(en December !, "##$ under your observation showed that cost was P"22,### and net realiAable value +N<=, P"44,###. /he inventory on :anuary !, "##$ showed cost of P$#,### and net realiAable value of P02,###. It is the corporations practice to value inventory at lower of cost or N<=. -ny loss between cost and N<= is included in 8ther e5penses. b. /he average gross profit rate was 4#? of net sales. c. /he accounts receivable as of :anuary !, "##$ were P!2,###. During "##$, accounts receivable written off during the year amounted to P!#,###. -ccounts receivable as of December !, "##$ were P02,###. d. 8utstanding purchase invoices amounted to P"2,### at the end of "##$. -t the beginning of "##$ they were P02.###. e.
%$eginning inventory Purchases Freight7in Purchase returns Purchase allowances Departmental transfer7in -dditional mar(ups 'ar(up cancellation
Cost !,!##,### !2,1##,### 4##,### 9##,### ##,### 4##,###
'ar(downs 'ar(down cancellation
!,###,### !##,###
)ales )ales returns )ales discounts 6mployee discounts Normal losses, bro(erage
"4,0##,### 2#,### "##,### 9##,### 2#,###
!$. /he correct inventory balance at December !, "##$ is% a. "#,### c. "!9,### b. "!,### d. "!0,### Problem =III /he following transactions of the -bner Company occurred during "##$% :an. " & Purchased "#,### shares of ulaga Company for P4# per share plus bro(erage fees of P4,2##, classified as trading securities. Feb. ! & Purchased "#,### ordinary shares of '/= Company at P!"2 per share plus bro(erage fees of P!$,###, classified as available7for7sale securities. -pr. ! & Purchased P",###,### of
P42Jsh. P!#Jsh. !#"
ased on the above information, compute the following% "#. @ain or loss on sale of
P2,###,###
7
-partment building mortgage assumed by Dondon, including related accrued interest at the time of purchase Delin;uent property ta5es assumed by Dondon Payments to tenants to vacate the apartment building Cost of demolishing the apartment building Net proceeds from sale of salvaged materials -rchitects fee for new building uilding permit for new construction Fee for title search )urvey before construction of new building 65cavation before construction of new building Payment to building contractor -ssessment by city for drainage proBect Cost of grading and leveling /emporary ;uarters for construction crew /emporary building to house tools and materials Cost of changes during construction to ma(e new building more energy efficient Interest cost on specific borrowing incurred during construction Payment of medical bills of employees accidentally inBured while inspecting building construction Cost of paving driveway and par(ing lot Cost of installing lights in par(ing lot Premium for insurance on building during construction Cost of open house party to celebrate opening of new building Cost of windows bro(en by vandals distracted by the celebration )avings on construction Interest that could have been earned if the funds used in construction were invested in mar(etable securities
!2#,### 2,### "2,### 9#,### 2,### !##,### 2#,### #,### "#,### !2#,### !2,###,### !",### 9#,### 0#,### 2#,### !"#,### 42#,### !4,### 1#,### !",### 2#,### 9#,### !2,### ",###,### ##,###
ased on the above information, determine the following% "4. Cost of land% a. 2,00,### b. 2,0,###
c. 2,10,### d. 2,90,###
"2. Cost of building% a. !9,#!#,### b. !9,#0#,###
c. !9,#4#,### d. !9,!#,###
Problem 8n December !, "##1, -C Company3s balance sheet disclosed the following property and e;uipment balances after recording depreciation% uilding -ccumulated depreciation
9,###,### ",###,###
4,###,###
6;uipment -ccumulated depreciation
",4##,### 1##,###
!,9##,###
/he company has adopted the revaluation model for the valuation of its property and e;uipment. /his has resulted in the recognition in prior periods of an asset revaluation surplus for the building of P##,###. 8n December !, "##0, an independent appraiser reported the following%
uilding 6;uipment
Fair value ,"##,### !,1##,###
-s of December !, "##1, the remaining useful lives of these assets are% uilding
"2 years 8
6;uipment
4 years
ased on the above data and the result of your audit, compute the following +Ignore income ta5% "9. -mount to be recogniAed in "##1 profit or loss related to the revaluation of property and e;uipment. a. 1##,### c. 2##,### b. 9##,### d. ##,### "0. /otal depreciation in "##1. a. "##,### b. 201,###
c. 14#,### d. !,"2#,###
"1. -mount of revaluation surplus as of December !, "##$. a. # c. "##,### b. !2#,### d. "11,### Problem I 8n :une !, "##$, 'ay Corp. ac;uired the rights to a coal mine containing estimated reserves of ",###,### tons of coal. /he company estimated that "2,### tons of coal would be e5tracted and sold each month. Cost allocable to coal was P0,###,###. -lso on :une !, "##$, the company purchased an e;uipment to be used in the production, costing P!$#,### which has an estimated useful life of !# years. /he e;uipment was e5pected to become obsolete after all the coal deposits had been e5tracted from the mine and only P!#,### selling price of the e;uipment could be e5pected. Production was in full blast since :une ", "##$. "$. ased on the above and the result of your audit, the amount of depreciation e5pense for the year ended December !, "##$ should be% a. !#,2## c. $,### b. !,2## d. !2,02# Problem II >uther Corp. has its own research department. Eowever, the company purchases patents from time to time. /he following is a summary of transactions involving patents now owned by the corporation% !. During "##! and "##", >uther spent a total of P42$,### in developing a new process that was patented +Patent - on -pril !, "##K additional legal and other costs of P2#,### were incurred. ". - patent +Patent developed by Is(o Inventor, an inventor, was purchased for P!10,2## on December !, "##4, on which date it had an estimated useful life of !" !J" years. . During "##, "##4, and "##2, research and development activities cost P2!#,###. No additional patents resulted from these activities. 4. - patent infringement suit brought by the company against a competitor because of the manufacture of articles infringing on Patent was successfully prosecuted at a cost of P4",9##. - decision in the case was rendered in :une "##2. 2. 8n :uly !, "##9, Patent C was purchased for P!0",1##. /his patent had !9 years yet to run. 9. During "##0, >uther e5pended P!1#,### on patent development. Eowever, the company is still undecided as to how the patent, if approved by the ureau of Patents, will generate probable future economic benefits. ased on the above information, determine the following% #. Carrying value of Patents as of December !, "##0. a. 0",!#! c. 92",22# b. 2,$02 d. 4"2,2!2 !. Patent amortiAation e5penses in "##0. 9
a. 4",9## b. "1,##
c. 24,"2# d. "0,"##
Problem III 'abenta Company purchased a customer list and a formula for a total of P",###,###. 'abenta uses the e5pected cash flow approach for estimating the fair value of these two intangibles. /he appropriate interest rate is 1?. /he potential future cash flows from the two intangibles, and their associated probabilities, are as follows% Customer >ist% 8utcome ! 7 "#? probability of cash flows of P"2#,### +at the end of each year for 2 years. 8utcome " 7 #? probability of cash flows of PI2#,### +at the end of each year for 4 years. 8utcome 7 2#? probability of cash flows of P2#,### +at the end of each year for years. Formula% 8utcome ! 7 !#? probability of cash flows of P!,2##,### +at the end of each year for !# years. 8utcome " 7 "#? probability of cash flows of P2##,### +at the end of each year for 4 years. 8utcome 7 0#? probability of cash flows of P##,### +at the end of each year for years. ased on the above data, compute the following% ". Costs of customer list. a. "#,#0 b. 41,44#
c. $2,#4" d. 9#,409
. 6stimated fair value of the formula. a. #$,910 b. 4,412
c. ","$",2## d. !,101,$!2
Problem I= ou were engaged by =ista Corporation to audit its financial statements for "##$. /he following items were provided by the accountant of =ista as of December !, "##$% -ccounts payable & trade Dividends payable +ordinary shares to be distributed as a result of dividend declaration Cash overdraft with -C an( -ccrued e5penses Deposits and advances from customers Income ta5es payable Premium claims outstanding 6stimated e5penses of meeting guarantee for service re;uirement on merchandise sold *nreleased company chec( Claims for increase in wages and allowances by the employees of =ista Company, covered by a pending lawsuit Credit balance in debtor3s accounts -cceptances payable Debit balance in supplier3s account @ift certificates outstanding Dividends in arrears on cumulative preference shares Dividends in arrears on non7cumulative preference shares an( loan payable & due on :une #, "#! Notes payable in installment +amount due in )eptember #, "#!# & P2##,### Deferred ta5 liabilities Provisions for future operating losses onds payable & due on :une #, "#!# and payable out of sin(ing
",###,### 2##,### !#,### !2,### !#,### 4##,### !"#,### !##,### !2,### !,###,### !",### "#,### 9,### !#,### 9##,### ##,### ",###,### ",2##,### 2##,### !,2##,### 2,###,### 10
fund of P4,###,### 4. -ssuming that the above data are correct, the amount of current liabilities of =ista Corporation as of December !, "##$ should be% a. ,1"9,### c. 1,",### b. $,1",### d. none of the above Problem = /he noncurrent liabilities of P Company at December !, "##1 included the following% Note payable & ban( >iability under finance lease Note payable & supplies
P,9##,### ",9","## !,2##,###
/ransactions during "##$ and other information relating to P3s liabilities were as follows% a. /he note payable to the ban( bears interest at "#? and is dated 'ay !, "##1. /he principal amount of P,9##,### is payable in four e;ual annual installments of P$##,### beginning 'ay !, "##$. /he first principal and interest payment was made on 'ay !, "##$. b. /he finance lease is for a ten7year period. 6;ual annual payments of P02#,### are due on December !, of each year. /he interest rate implicit in the lease is !1?. /he amount of P",9","## represents the present value of the si5 remaining lease payments +due December !, "##$ through December !, "#!4 discounted at !1?. c. /he note payable to supplier bears interest at !$? and matures on )eptember #, "#!#. 8n February "2, "#!#, after the December !, "##$ balance sheet date, but before the "##$ statements were authoriAed for issue, P Company consummated a noncancelable agreement with a lender to refinance the !$?, P!,2##,### on a long7 term basis, on readily determinable terms that have not yet been implemented. oth parties are financially capable of honoring the agreement, and there have been no violations of the agreements provisions. d. 8n -pril !, "##$, P issued for P0,##2,902, P9,###,### face amount of its "#?, P!##,### bonds. /he bonds were issued to yield !2?. /he bonds are dated -pril !, "##$ and mature on -pril !, "#!4. Interest is payable annually on -pril !. ased on the above and the result of your audit, determine the following% 2. >iability under finance lease as of December !, "##$ a. !,10,"## c. !,!","## b. ",42,09 d. ",#!0,244 9. Carrying amount of bonds payable as of December !, "##$ a. 0,!!0,29 c. 9,1$,1! b. 0,4!0,29 d. 9,129,2"0 0. /otal noncurrent liabilities as of December !, "##$ a. !","!!,20 c. !#,0!!,20 b. !#,!24,!$# d. $,1!0,#!4 1. Current portion of long7term liabilities as of December !, "##$ a. ,!2#,### c. ",0"0,1" b. ",1!",1"4 d. ",!9$,194 $. /otal interest e5pense for "##$ a. ",!42,!4 b. ",4#1,#"1
c. !,$#2,!4 d. !,90,!$
Problem =I 'oon Corporation operates a retail store and must determine the proper December !, "##$, year7end accrual for the following e5penses%
11
•
•
•
/he store lease calls for fi5ed rent of P!",### per month, payable at the beginning of the month, and additional rent e;ual to 9? of net sales over P",2##,### per calendar year, payable on :anuary !, of the following year. Net sales for "##$ are P4,2##,###. -n electric bill of P1,2## covering the period !"J!9J#$ through !J!2J!# was received :anuary "", "#!#. - P4,### telephone bill was received :anuary 0, "#!#, covering% )ervice in advance for :anuary "#!# P!,2## >ocal and toll calls for December "##$ ",2##
4#. In its December !, "##$ statement of financial position, 'oon Corporation should report accrued liabilities of a. !"9,02# c. "09,02# b. !1,02# d. None of the above Problem =II @lad 'anufacturing Company leased an e;uipment to @reat Company on -pril !, "##$. /he lease is appropriately recorded as a sale by @lad. /he lease is for an 17year period ending 'arch !, "#!0. /he first of 1 e;ual annual payments of P!02,### +e5cluding e5ecutory costs was made on -pril !, "##$. /he cost of the e;uipment to @lad is P$4#,###. /he e;uipment has an estimated useful life of !# years with an unguaranteed residual value of P!##,###. -t the end of the lease term, the leased e;uipment reverts to @lad 'anufacturing Company. /he interest rate implicit in the lease is !#?. /he present value of an annuity due of P! at !#? for 1 periods is 2.1914 and the present value of P! at !#? for 1 periods is #.4992. 4!. ased on the above information, the cost of sales arising from this lease transaction amounted to a. 1$,2# c. !,#"9,$0# b. $4#,### d. 9$$,02# Problem =III /he following information pertains to stoc(holders3 e;uity accounts of -stra Corporation after its initial year of operation in "##$% :an. ! & Issued 9,### shares at par of P!## in e5change for land with mar(et value of P1##,###. :an. # & )old 1,### shares at P!"#. 'ar. !2 & Purchased 1## of -stra shares at P!2#. 'ar. "# & )old a machine with a loss of P4#,###. -pril !2 & Purchased !,### of Casper shares at P!4#. :une !2 & )old 4## treasury shares for P91,###. )ept. "# & )old a fully depreciated e;uipment for P!2,###. Dec. ! & Declared cash dividends of P1#,### payable on :anuary !2, "#!#. Dec. ! & Net income for the year is !9,###. 4". /otal stoc(holder3s e;uity as of December !, "##$ should be a. !,094,### c. !,$44,### b. !,$!$,### d. !,$#4,### Problem I /he shareholders3 e;uity of -C, Inc. at December !, "##1 showed ,###,### authoriAed, P!# par value, ordinary shares, of which !,###,### shares were issued and outstanding. /he shareholders e;uity accounts at December !, "##9 had the following balances% • • •
8rdinary share capital )hare premium
P!#,###,### ,02#,### ,"2#,###
/ransactions during "##$ and other information relating to the shareholders e;uity accounts were as follows% 12
a. 8n :anuary ", "##$, -C issued at P24 per share, 2#,### shares of P2# par value, $? cumulative convertible preference shares. 6ach preference share is convertible into two ordinary shares. -C had ##,### authoriAed shares of preference shares. /he preference share has a li;uidation value e;ual to its par value. b. 8n February !, "##$, -C reac;uired !#,### ordinary shares for P!9 per share. c. 8n -pril #, "##$, -C sold "2#,###, P!# par value, ordinary7shares +previously unissued to the public at P!0 per share. d. 8n :une !2, "##$, -C declared a cash dividend of P! per share on ordinary shares, payable on :uly !2, "##$, to shareholders of record on :uly !, "##$. e. 8n November !#, "##$, -C sold 2,### treasury shares for P"! per share. f. 8n December !2, "##$, -C declared the yearly cash dividend on preference share, payable on :anuary !2, "#!#, to shareholders of record on December !, "##$. g. 8n :anuary "#, "#!#, before the boo(s were closed for "##$, -C became aware that the ending inventories at December !, "##1 were understated by P!2#,### +after ta5 effect on "##1 profit was P$#,###. /he appropriate correction entry was recorded the same day. h. -fter correcting the beginning inventory, profit for "##$ was P","2#,###. ased on the above information and the result of your audit, compute the following as of December !, "##$% 4. )hare premium a. 2,2##,### b. 2,2"2,###
c. 2,0##,### d. 2,0"2,###
44. /otal shareholders3 e;uity a. "",!$#,### b. "4,9$#,###
c. "4,00#,### d. "4,14#,###
42. oo( value per share a. !0.1$ b. !0.1"
c. !0.0! d. !2.4!
Problem In the course of your audit of )NN Company, you have gathered the following transactions in relation to the preparation of the Cash Flow )tatement for the year ended December !, "##$% Net income Depreciation e5pense -mortiAation of intangible assets >oss on sale of machinery *nrealiAed gain on sale of available7for sale securities Proceeds from sale of fully depreciated e;uipment Purchase of trading securities )ale of trading securities +cost, P!##,### Purchase of available7for7sale securities )ale of available7for7sale securities +cost, P!##,###
22#,### 1##,### "##,### #,### !9#,### !#,### 2##,### ""#,### 4##,### #,###
-dditional information is as follows% Fair mar(et value of remaining trading securities on December !, "##$ is P"9#,###. Fair mar(et value of remaining available7for7sale securities on December !, "##$ is P1#,###. •
•
49. ased on the above information, the amount to be reported as net cash flow provided by or used in operating activities should be% a. !,0$#,### c. !,1#,### b. !,01#,### d. !,90#,### Problem I
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In the course of your audit of ugoy Company, you have gathered the following transactions in relation to the preparation of the Cash Flow )tatement for the year ended December !, "##$% Purchased building for P!,###,### cash and issuing P2##,### ordinary shares at par value Proceeds from sale of fully depreciated machinery Purchased a 7month Philippine treasury bill Purchased a noncurrent investment Cash dividends paid )ale of 7month Philippine treasury bill
!,2##,### !2,### !,###,### ",###,### 2##,### !,!##,###
40. ased on the above information, the amount to be reported as net cash flow provided byJused in investing activities is% a. ",$12,### c. ,!!2,### b. ,2!2,### d. ,9!2,### Problem II our audit client, @rey Company reported income before ta5es of P0#,### for "##1 and P2"9,### for "##$. In the course of the audit, you gathered the following information% a. /he ending inventory for "##1 included ",### units erroneously priced at P2.$# per unit. /he correct cost was P$.2# per unit. b. 'erchandise costing P!0,2## was shipped to @rey Company, F8 shipping point, on December "9, "##1. /he purchase was recorded in "##1 but the merchandise was e5cluded from the ending inventory because it was not received until :anuary 4, "##$. c. 8n December "1, "##1, merchandise costing P",$## was sold for P4,### to lue Corp. lue had as(ed @rey to (eep the merchandise for it until :anuary ", when it would come and pic( it up. ecause the merchandise was still in the merchandise was still in the store at year7end, the merchandise was included in the inventory count. /he sale was recorded in December "##1. d.
– End of Examination – -
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