Auditing Problems Test Bank 2

AUDITING PROBLEMS TEST BANK 2 PROBLEM NO. 1 You have been assigned to audit the financial statements of AYALA MERCHANTS CORPORATON CORPORATON fo! the "ea! "ea! #$%&' The com(an" com(an" is a deale! of a((liance a((liancess and has seve!al seve!al b!anches b!anches in Met!o Met!o Manila' Manila' ts main main office is located located in Ma)ati Ma)ati Cit"' Cit"' You *e!e given given b" the com(an" cont!olle! the unad+usted balances of the items to be included in the com(an",s statement of financial (osition and statement of income as of and fo! the "ea! ended -ecembe! .%/ #$%&' Audit findings findings a!e as follo*s0 follo*s0 ' A1-T O2 CASH A cash count *as conducted b" "ou! staff on 3anua!" &/ #$%4' The (ett" cash fund of P5$/$$$ maintained b" the com(an" on an im(!est basis !elected a balance of P##/&6$' 1n!e(lenished e7(enses totaled P.&/#6$ of *hich P8/6%$ (e!tains to 3anua!" #$%4' You *e!e fu!nished a co(" of the com(an",s ban) !econciliation statement *ith Cha!te!ed 9an) as follo*s0 9alance (e! ban) Add0 -e(osit in t!ansit 9an) debit memos Retu!ned chec) Less0 Outstanding chec)s 9oo) e!!o! 9alance (e! boo)s

P#&&/88: #:4/4.5 &%#/&6$ 5./$$$ ;%&:/64$< ;&#/$$$< P%/$65/$$$

You! !evie* of the !econciliation statement disclosed the follo*ing0 %' Postda Postdated ted chec)s chec)s totaling totaling P%$&/:$$ P%$&/:$$ *e!e include included d as (a!t of the de(osit de(osit in t!ansi t!ansit' t' Thes These e !e(! !e(!es esen entt coll collect ectio ions ns f!om f!om va!i va!iou ouss custo custome me!s !s *hose *hose accou account ntss have have been been outsta outstandi nding ng fo! less than th!ee months' months' These These chec)s chec)s *e!e actuall" actuall" de(osit de(osited ed on 3anua!" 4/ #$%4' #' nclude ncluded d in the de(osi de(ositt in t!ansi t!ansitt is a chec) f!om f!om a custom custome! e! fo! P5./$$$ P5./$$$ *hich *hich *as !etu!ned b" the ban) ban) on -ecembe! #&/ #$%& fo! insufficienc" of funds' This account has been outstandi outstanding ng fo! ove! si7 months' months' The chec) *as *as !e(laced !e(laced b" the custome! custome! on 3anua!" %6/ #$%4' .' The ban) debite debited d the accoun accountt of A"ala A"ala Me!chants Me!chants fo! P&%$/$$$ P&%$/$$$ as (a"men (a"mentt of notes (a"able including inte!est of P%$/$$$ due on -ecembe! #5/ #$%&' This *as not !eco!ded as of "ea!=end' :' A chec) *as clea!e clea!ed d b" the ban) ban) as P.$/8$ P.$/8$$ $ but *as !eco!d !eco!ded ed b" the boo))ee boo))ee(e! (e! as P%$#/8$$' This *as in in (a"ment of accounts (a"able' (a"able' 6' 9an) se!vic se!vice e cha!ges cha!ges totaling totaling P#/&6$ P#/&6$ *e!e *e!e not !eco!ded !eco!ded'' ' A1-T O2 ACCO1NTS RECE>A9LE RECE>A9LE AN- ALLO?ANCE 2OR -O19T21L ACCO1NTS t is the com(an",s (olic" to (!ovide allo*ance fo! doubtful accounts as follo*s0

Less than . months . to 5 months Ove! 5 months Total

P#/6$$/85$ 4:./#$$ #&:/6$$ P./5%4/55$

%@ 6@ %$@

An anal"sis of the accounts !eceivable schedule sho*ed that seve!al long outstanding accounts fo! mo!e than a "ea! totaling P%6#/:5$ should be *!itten=off'

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' A1-T O2 MARETA9LE SEC1RTES B TRA-N The com(an",s eDuit" (o!tfolio as of "ea!=end sho*ed the follo*ing0

9acnotan Cement 2il=Estate onics La Tondena Selecta 1nion 9an)

Total Sha!es &/$$$ %$/$$$ #/:$$ #/$$$ 4/$$$ %/5$$

The secu!iti secu!ities es a!e liste listed d in the stoc) e7change e7change'' accounting'

Ma!)et >alue Cost P%$4/6$$ %86/$$$ :8/#$$ 5&/$$$ .%/5$$ 6$/44$ P6$#/%4$

(e! Sha!e P%5'$$ %8'&6 #:'$$ #5'$$ %'#$ #&'6$

The com(an" com(an" follo*s follo*s the fai! value value

>' A1-T O2 NOTES RECE>A9LE The note !eceivable amounting to P%/.$$/$$$ !e(!esents a loan g!anted to a subsidia!"' This is cove!ed b" a (!omisso!" note *ith inte!est at %6@ (e! annum dated Novembe! %/ #$%&' No inte!est has been acc!ued on the note as of -ecembe! .%/ #$%&' >' A1-T O2 PREPAYMENTS P!e(aid e7(enses account consists of the follo*ing0 P!e(aid P!e(aid P!e(aid 1nused

adve!tising insu!ance !ent office su((lies

P 5:$/$$$ :8$/$$$ :#$/$$$ .5%/$$$ P%/8%%/$$$

A"ala Me!chants !ene*ed its cont!act *ith an adve!tising agenc" fo! the annual (!omotion as *ell as the !egula! adve!tisement adve!tisement of its (!oducts' t (aid a total total of P5:$/$$$/ P%$$/$$$ of *hich is fo! the Ch!istmas (!omotion (!omotion *hile the balance balance is fo! the !egula! !egula! (!omotion and *hich *ill *ill !un fo! one "ea! sta!ting sta!ting on August %/ #$%&' Pa"ment Pa"ment *as made on 3ul" #$/ #$%&/ and the total amount *as * as !eflected as (!e(aid adve!tising' The com(a com(an" n" leas leases es the ma main in offi office ce and and sto!e sto!e in Ma)a Ma)ati ti Cit" Cit" at a mont monthl hl" " !ent !ental al of P%:$/$$$' P%:$/$$$' On Novembe! Novembe! 6/ #$%&/ a chec) fo! P:#$/$$$ P:#$/$$$ *as issued issued in (a"ment (a"ment of th!ee= month !ental !ental as (e! !ene*al cont!act cont!act *hich *as effective effective on Novembe! Novembe! %/ #$%&' Rental de(osit !emained at th!ee months and is included unde! othe! assets' The com(an",s delive!" eDui(ment is insu!ed *ith 2o!tune nsu!ance Co!(o!ation fo! a total cove!age cove!age of P#': million' million' Total (a"ment (a"ment made on Novembe! Novembe! %5/ #$%& #$%& fo! the !ene*al amounted to P:8$/$$$ *hich cove!s the (e!iod f!om Novembe! %/ #$%& to Novembe! %/ #$%4' No ad+ustment has been made as of -ecembe! .%/ #$%&' To ta)e advantage of volume discount !anging f!om %$@ to #$@/ the com(an" bu"s office and sto!e su((lies on a bul) basis' basis' The staff=in=cha!ge bought su((lies *o!th P##$/$$$ on 3une %$/ #$%& and included included the same in thei! thei! office su((lies su((lies invento!"' invento!"' As at "ea!=end/ "ea!=end/ unused office su((lies amount to P%$#/6$$'







Page . >' A1-T O2 N>ENTORES A (h"sical count of invento!ies *as conducted simultaneousl" in all sto!es on -ecembe! #8 and #$/ #$%&' You! !evie* of the list list submitted b" the accountant disclosed disclosed the follo*ing0 %'

Some Some delive delive!ie !iess made in -ecem -ecembe! be! #$%& #$%& have not not been invoi invoiced ced and !eco! !eco!ded ded as of "ea!=end' "ea!=end' These items items had had a selling selling (!ice (!ice of P%:5/8:$ P%:5/8:$ *ith te!m of %6 da"s' da"s' The co!!es(onding cost *as al!ead" deducted f!om the ending invento!"'

#'

ood oodss on cons consig ignm nmen entt to A"al A"ala a Me!ch Me!chan ants ts tota totali ling ng P.65 P.65/$ /$$$ $$ *e!e *e!e incl includ uded ed in the the invento!" list'

.'

Some a((li a((liances ances *o!th P%.4/6$$ P%.4/6$$ *e!e *e!e !eco!ded !eco!ded t*ice in the the invento!" invento!" list'

:'

oods oods costing costing P%6./ P%6./4$$ 4$$ (u!cha (u!chased sed and and (aid on -ecem -ecembe! be! #5 *as !ecei !eceived ved on 3anua 3anua!" !" :/ #$%4' The goods *e!e shi((ed b" the su((lie! on -ecembe! #4/ 2O9 shi((ing (oint'

>' A1-T O2 PROPERTY/ PLANT AN- E1PMENT The com(an" (u!chased (u!chased additi additional onal eDui(ment eDui(ment *o!th P#54/$$$ P#54/$$$ on 3une .$/ #$%&' At the date of (u!chase/ it incu!!ed the follo*ing additional costs *hich *e!e cha!ged to !e(ai!s and maintenance account0 2!eight=in P.$/:$$ nstallation cost %./$$$ To Total P:./:$$ The above eDui(ment has an estimated useful life of ten "ea!s and estimated salvage value of P#$/$$$' -e(!eciati -e(!eciation on fo! the above eDui(ment eDui(ment has been (!ovided (!ovided based based on o!iginal cost' The com(an" disca!ded some sto!e eDui(ment on Octobe! %/ #$%&/ !ealiFing no salvage valu value' e' The The cost cost of thes these e eDui eDui(m (men entt am amou ount nted ed to P%56/ P%56/6# 6#$ $ *ith *ith an accu accumu mula late ted d de(!eciati de(!eciation on of P%.4/5#$ on -ecembe! -ecembe! .%/ #$%&' -e(!eciati -e(!eciation on boo)ed f!om Octobe! Octobe! %/ #$%& to "ea!=end *as P%$/:4$' No ent!" *as made on the dis(osal of the (!o(e!t"' (!o(e!t"'

>' A1-T O2 ACCR1E- EGPENSES Some Some e7(ens e7(enses es fo! -ecembe! -ecembe! #$%& #$%& *e!e *e!e !eco!d !eco!ded ed *hen *hen (aid (aid in 3anua! 3anua!" " #$%4 *hich included the follo*ing0 Elect!ic bills P&./:$$ Commission of sales agents 6&/$$$ Tele(hone cha!ges :#/6$$ Mino! !e(ai! of delive!" eDui(ment #%/.:$ ?ate! bills %4/&5$ To Total P#%./$$$ G' A1-T O2 LA9LTES A"ala Me!chants obtained a one="ea! loan f!om Cha!te!ed 9an) amounting to P#'5 million at an inte!est inte!est !ate of %5@ (e! annum on Octobe! Octobe! %/ #$%&' Acc!ued Acc!ued inte!est inte!est on this loan *as not ta)en u( at "ea!=end'







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G' OTHER A1-T 2N-NS A !evie* of the minutes of meeting sho*ed that a %$@ cash dividend *as decla!ed to sha!eholde!s of !eco!d as of -ecembe! %6/ #$%&/ (a"able on 3anua!" .%/ #$%4'

A"ala Me!chants Co!(o!ation 1NA-31STE- TRAL 9ALANCE -ecembe! .%/ #$%&

Pett" cash fund Cash in ban) T!ading secu!ities Accounts !eceivable B t!ade Allo*ance fo! doubtful accounts Notes !eceivable nvento!ies P!e(aid adve!tising P!e(aid insu!ance P!e(aid !ent Office su((lies invento!" 2u!nitu!e and fi7tu!es -elive!" eDui(ment Accumulated de(!eciation Othe! assets Accounts (a"able B t!ade Notes (a"able Acc!ued e7(enses 9onds (a"able -iscount on bonds (a"able O!dina!" sha!e ca(ital Retained ea!nings Sales Cost of goods sold O(e!ating e7(enses Othe! income Othe! cha!ges

-ebit P 5$/$$$ %/$65/$$$ :4./5:$ ./5%4/55$

C!edit

P %%$/.5$ %/.$$/$$$ &/#&:/8$$ 5:$/$$$ :8$/$$$ :#$/$$$ .5%/$$$ %/#84/:$$ #/&&$/$$$ %/%&&/6$$ 6:4/$$$ #/.65/.#$ ./.$$/$$$ %58/$:$ 6/$$$/$$$ 6$$/$$$ 6/:$$/$$$ &8#/%5$ %./$&4/$$$ 4/$.:/$$$ ./.6&/$$$ %/:6./6$$ 5#6/#4$ P.#/4.5 4.5/44$

P.#/4 #/4.5/44$

-ete!mine the ad+usted balances of the follo*ing0 ;gno!e ta7 im(lications< im(lications< %' Pett Pett" " cas cash h ffun und d A' P.&/#6$

9' P5$/$$$

C' P##/&6$

D. P.#/#5$

#' Cash in in ba ban) A' P6##/56$

9' P:6$/56$

C' P%/$65/$$$

D. P#::/46$

.' T!ad T!adin ing g secu! secu!it itie iess A' P:$./5:$

9' P6$#/%4$

C' P:8%/#:$

D. P:&#/&$$







Page 5' Notes Notes and inte!e inte!est st !eceiv !eceivabl able e A' P%/..%/85$ 9' P%/..#/%5$

C. P%/..#/6$$

-' P%/.$$/$$$

&' nv nvento ento!i !ies es A. P5/8.:/#$$

9' P&/#&:/8$$

C' P&/#8$/#$$

-' P5/&4$/:$$

4' P!e( P!e(ai aid d insu insu!a !anc nce e A' P::8/%5&

B. P:$4/...

C' P:8$/$$$

-' P:#4/&6$

8' P!e P!e(ai (aid !ent ent A. P%:$/$$$

9' P $

C' P:#$/$$$

-' P# P#4$/$$$

9' P5:$/$$$

C' P.&./..:

D. P.%6/$$$

%%' %%' Offi Office ce su(( su((li lies es inve invent nto!" o!" A' P#64/6$$ 9' P%%&/6$$

C' P.5%/$$$

D. P%$#/6$$

%#' %#' Tota Totall cu!!e cu!!ent nt asse assets ts A' P%:/$.../5%#

C. P%./5&&/555

-' P%./6.&/555

%.' P!o(e! P!o(e!t"/ t"/ (lant/ (lant/ and eDui(m eDui(ment ent A' P:/$54/:$$ 9' P#/8$6/##4

C. P./8:5/#4$

-' P./8$#/44$

%:' Accumu Accumulat lated ed de(!e de(!ecia ciatio tion n A' P%/$.4/44$ B. P%/$:%/$6$

C' P%/%&&/6$$

-' P%/%&8/5&#

%6' %6' Acco Accoun unts ts (a" (a"ab able le A' P#/6#6/.5$

B. P#/:#4/.#$

C' P#/68&/.5$

-' P#/.65/.#$

%5' %5' nte nte!e !est st (a" (a"ab able le A. P%$:/$$$

9' P%5/%&4

C' P:/$$$

-' P#&/5::

%&' Total Total cu!!ent cu!!ent liabi liabilit lities ies A' P5/4$./&84 9' P5/%$./&84

C. P5/$6:/.5$

-' P6/5$./&84

%4' Sales A' P%./$54/::$

9' P%./$&4/$$$

C. P%./##:/8:$

-' P%#/..8/6$$

%8' %8' Cost Cost of good goodss sol sold d A' P4/$.:/$$$

9' P4/#.5/#$$

C' P4/$%4/&$$

D. P4/.&:/&$$

#$' #$' O(e! O(e!at atin ing g e7(e e7(ens nses es A' P:/#85/6%:

9' P./.6&/$$$

C' P:/.:%/6%:

D. P:/5#%/6%:

%$' %$' P!e( P!e(ai aid d adv adve! e!ti tisi sing ng A' P.#6/$$$

9' P%./6#./455

6







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5

PROBLEM NO. 2 To substantiate the e7istence of the accounts !eceivable balances as at -ecembe! .%/ #$%& of L1AS COMPANY/ COMPANY/ "ou have decided decided to send confi!mation confi!mation !eDuests to custome!s' custome!s' 9elo* is a summa!" summa!" of the confi!mation confi!mation !e(lies !e(lies togethe! togethe! *ith the e7ce(tions e7ce(tions and audit findings' findings' !oss (!ofit on sales is #$@' The com(an" is unde! the (e!(etual (e!(etual invento!" method' Name of Custome! Conco!dia

9alance Pe! 9oo)s P%6$/$$$

2alcon

P.$/$$$

LaFa!o

P%::/$$$

Silang

P%%#/6$$

Ya)al

P%.6/$$$

Comments 2!om Custome!s P8$/$$$ *as !etu!ned on -ecembe! .$/ #$%&' Co!!ect balance as as is P5$/$$$' You! CM !e(!esenting (!ice ad+ustment dated -ecembe! #4/ #$%& cancels this' You have ove!(!iced us b" P%6$' Co!!ect (!ice should be P.$$' ?e !e !eceived th the go goods on onl" on on 3a 3anua!" 5/ 5/ #$%4' 9alance *as offset b" ou! -ecembe! shi(ment of "ou! !a* mate!ials'

Audit 2indings Retu!ned goods *e!e !eceived -ecembe! .%/ #$%&' The The CM *as *as ta)en a)en u( b" Lu)as Com(an" in #$%4' The com(laint is valid' Te!m is shi((ing (oint' Shi((ed in #$%&' Lu)a Lu)ass Com( Com(a an" c!ed c!edit ited ed accounts (a"able fo! P%.6/$$$ to !eco!d (u!c u!chases ses' Ya)al is is a su((lie!'

#%' f the necessa!" necessa!" ad+usti ad+usting ng +ou!nal +ou!nal ent!" is made made !ega!ding !ega!ding the the case of Conco!dia Conco!dia// the net income *ill A. -ec!ease b" P%4/$$$' 9' -ec!ease b" P8$/$$$'

C' nc!ease b" P%4/$$$' -' nc!ease b" P8$/$$$'

##' The effect effect on #$%& net net income of of Lu)as Com(an" Com(an" of its failu!e failu!e to !eco!d !eco!d the CM CM involvin involving g t!ansaction *ith 2alcon0 A. P.$/$$$ ove!' 9' P.$/$$$ unde!'

C' P5/$$$ ove!' -' P5/$$$ unde!'

#.' The ove!stateme ove!statement nt of !eceivable !eceivable f!om LaFa!o is A' P85/$$$

9' P#:/$$$

C' P&#/$$$

D. P:4/$$$

#:' The accou accounts nts !ecei !eceivab vable le f!om f!om Silan Silang g is A. Co!!ectl" stated' 9' P%%#/6$$ ove!'

C' P%%#/6$$ unde!' -' P##6/$$$ unde!'

#6' The ad+usti ad+usting ng ent!" ent!" to co!!ect co!!ect the !eceiva !eceivable ble f!om f!om Ya)al Ya)al is is A' Pu!chases Accounts !eceivable 9' Accounts (a"able Pu!chases C' Ac Accounts !eceivable Accounts (a"able D. Accounts (a"able Accounts !eceivable

%.6/$$$ %.6/$$$ %.6/$$$ %.6/$$$ %.6/$$$ %.6/$$$ %.6/$$$ %.6/$$$









Page & PROBLEM NO. 3 Palito/ CPA/ has +ust acce(ted an engagement to audit the financial statements of C!ocodile/ nc' fo! the "ea! ending ending -ecembe! -ecembe! .%/ #$%&' Afte! Afte! obtaining obtaining an unde!standing unde!standing of the client,s client,s design of the accounting and inte!nal cont!ol s"stems and thei! o(e!ation/ he then (!oceeded in (e!fo!ming test of cont!ols !elated to (!oduction c"cle' The follo*ing Duestions !elated to test of cont!ols cont! ols of the (!oduction c"cle0 #5' ?hich ?hich of the follo* follo*ing ing auditin auditing g (!oced (!ocedu!e u!ess (!obab (!obabl" l" *ould (!ovide (!ovide the most !eliab !eliable le evidence conce!ning the entit",s asse!tion of !ights and obligations !elated to invento!ies0 A' T!ace the test counts noted du!ing the entit",s (h"sical count to the entit",s summa!iFation of Duantities' B. ns(ect ag!eements to dete!mine *hethe! an" invento!" is (ledged as collate!al o! sub+ect to an" liens' C' Select the last last fe* shi((ing shi((ing documents documents used befo!e befo!e the (h"sical (h"sical count count and dete!mine dete!mine *hethe! the shi(ments *e!e !eco!ded as sales' -' ns(e ns(ect ct the the o(en o(en (u!c (u!cha hase se o!de! o!de! file file fo! fo! sign signif ific ican antt comm commit itme ment ntss that that shou should ld be conside!ed fo! disclosu!e' #&' ?hich of the follo*ing follo*ing inte!nal inte!nal cont!ol cont!ol activities activities most most li)el" add!esse add!essess the com(leteness com(leteness asse!tion fo! invento!" A' The *o!)=in=(!ocess account is (e!iodicall" !econciled *ith subsidia!" invento!" !eco!ds' 9' Em(lo" Em(lo"ees ees !es(ons !es(onsibl ible e fo! custod" custod" of finish finished ed goods do not (e!fo!m (e!fo!m the !eceivin !eceiving g function Receiv ivin ing g !e(o !e(o!ts !ts a!e a!e (!en (!enum umbe be!e !ed d and and the numb numbe! e!in ing g seDu seDuen ence ce is chec chec)e )ed d C. Rece (e!iodicall"' -' The!e The!e is a se(a se(a!a !ati tion on of duti duties es bet* bet*ee een n the (a"! (a"!ol olll de(a de(a!tm !tmen entt and and inve invent nto!" o!" accounting (e!sonnel' #4' 2!om the audito! audito!,s ,s (oint of of vie*/ invent invento!" o!" counts counts a!e mo!e acce(ta acce(table ble (!io! (!io! to the "ea!= "ea!= end *hen A' nte!nal cont!ol is *ea)' B. Accu!ate (e!(etual invento!" !eco!ds a!e maintained' C' nvent nvento!" o!" is slo* slo* movi moving' ng' -' Significan Significantt amounts of invent invento!" o!" a!e held held on a consignme consignment nt basis' basis' #8' A !etaile! !etaile!,s ,s (h"sica (h"sicall count of invento! invento!" " *as highe! highe! than that that sho*n b" the (e!(etua (e!(etuall !eco!ds' ?hich of the follo*ing follo*ing could e7(lain e7(lain the diffe!ence diffe!ence A' nvento!" items had been counted but the tags (laced on the items had not been ta)en off and added to the invento!" accumulation sheets' B. C!edit memos fo! seve!al items !etu!ned b" custome!s had not been !eco!ded'







Page 4 PROBLEM NO. 4 A (o!tion of the SPAR COMPANY,s statement of financial (osition a((ea!s a((ea!s as follo*s0 -ecembe! .% .%/ #$%&

-ecembe! .% .%/ #$%5

P.6./.$$ $ 

P%$$/$$$ #6/$$$ %88/4&6



&6/$$$

Assets0 Cash Notes !eceivable nvento!" Liabilities0 Accounts (a"able

S(a!) Com(an" (a"s fo! all o(e!ating e7(enses *ith cash and (u!chases all invento!" on c!edit' -u!ing #$%&/ cash totaling totaling P:&%/&$$ P:&%/&$$ *as (aid on accounts (a"able' (a"able' O(e!ating O(e!ating e7(enses e7(enses fo! #$%& totaled totaled P##$/$$$' P##$/$$$' All sales sales a!e cash sales' sales' The invento!" invento!" *as *as !estoc)ed !estoc)ed b" (u!chasing (u!chasing %/6$$ units units (e! month and valued b" using using (e!iodic (e!iodic 22O' The unit cost of invento!" invento!" *as P.#'5$ du!ing 3anua!" #$%& and inc!eased inc!eased P$'%$ (e! month du!ing the "ea!' S(a!) sells onl" one (!oduct' All sales a!e made fo! P6$ (e! unit' The ending invento!" invento!" fo! #$%5 *as valued at P.#'6$ (e! unit'

.%' Numbe! Numbe! of unit unitss sold sold du!i du!ing ng #$%& #$%& A' &/$55

B. %4/:$$

C' :/ : /#54

-' %. %./:$$

.#' Accounts Accounts (a"abl (a"able e balance balance at -ecemb -ecembe! e! .%/ .%/ #$%& #$%& A' P%8$/%$$

9' P6$/$$$

C' P%88/%$$

D. P#$$/$$$

C' %& %&/$4:

-' %$/&6$

C. P%8#/86$

-' P%48/55$

..' nvent nvento!" o!" Duan Duantit tit" " on -ecem -ecembe! be! .%/ .%/ #$%& #$%& A. 6/&6$

9' #/ #/&6$

.:' Cost Cost of inve invento nto!" !" on -ece -ecembe mbe!! .%/ #$%& #$%& A' P%4&/:6$

9' P%45/4&6

.6' Cost of of goods goods sold sold fo! the the "ea! "ea! ended ended -ecembe -ecembe!! .%/ #$%& #$%& A' P5$8/%#6

9' P5$8/&$$

C' P5$5/8%6

D. P5$./5#6







Page 8 PROBLEM NO. 5 A de(!eciation schedule fo! semi=t!uc)s of S-RO MAN12ACT1RN COMPANY *as !eDuested b" "ou! "ou! audi audito to!! soon soon afte afte!! -e -ecem cembe be!! .%/ .%/ #$%&/ #$%&/ sho* sho*in ing g the the addi additi tion ons/ s/ !eti !eti!e !eme ment nts/ s/ de(!eciation/ and othe! data affecting the income of the com(an" in the :="ea! (e!iod #$%: to #$%&/ inclusive' The follo*ing data *e!e asce!tained' 9alance of T!uc)s account/ 3an' %/ #$%: T!uc) No' % (u!chased T!uc) No' # (u!chased T!uc) No' . (u!chased T!uc) No' : (u!chased 9alance/ 3an' %/ #$%:

3an' %/ #$%%/ cost 3ul" %/ #$%%/ cost 3an' %/ #$%./ cost 3ul" %/ #$%./ cost

P%4$/$$$ ##$/$$$ .$$/$$$ #:$/$$$ P8:$/$$$

The Accumulated -e(!eciationIT!uc)s account (!eviousl" ad+usted to 3anua!" %/ #$%:/ and ente!ed in the ledge!/ had a balance on that date of P.$#/$$$ ;de(!eciation on the fou! t!uc)s f!om the !es(ective dates of (u!chase/ based on a 6="ea! life/ no salvage value<' No cha!ges had been made against the account befo!e 3anua!" %/ #$%:' T!ansactions bet*een 3anua!" %/ #$%:/ and -ecembe! .%/ #$%&/ *hich *e!e !eco!ded in the ledge!/ a!e as follo*s' 3ul" %/ #$%:

T!uc) No' . *as t!aded t!aded fo! a la!ge! la!ge! one ;No' 6
3an' %/ #$%6

T!uc) No' % *as sold fo! fo! P.6/$$$ cashJ ent!" debited Cash and c!edited T!uc)s/ P.6/$$$'

3ul" %/ #$%5

A ne* t!uc) ;No' 5< *as acDui!ed acDui!ed fo! fo! P:#$/$$$ cash cash and *as cha!ged cha!ged at that amount to the T!uc)s account' ;Assume t!uc) No' # *as not !eti!ed'<

3ul" %/ #$%5

T!uc) No' : *as *as damaged in a *!ec) to such an e7tent e7tent that it *as sold as +un) fo! P&/$$$ cash' sid!o Mfg' Co' !eceived P#6/$$$ f!om the insu!ance com(an"' The ent!" made b" the boo))ee(e! *as a debit to Cash/ P.#/$$$/ and c!edits to Miscellaneous ncome/ P&/$$$/ and T!uc)s/ P#6/$$$'







Page %$ Ent!ies Ent!ies fo! de(!eciati de(!eciation on had been made at the close of each "ea! as follo*s0 follo*s0 #$%:/ P#%$/$$$J P#%$/$$$J #$%6/ P##6/$$$J #$%5/ P#6$/6$$J #$%&/ P.$:/$$$' .5' ?hat is the the total de(!eci de(!eciatio ation n e7(ense e7(ense fo! the "ea! "ea! ended ended -ecembe! -ecembe! .%/ #$%: #$%: A' P%4$/$$$

B. P%84/$$$

C' P%&#/$$$

-' P##4/$$$

.&' ?hat is is the gain ;loss< on t!ade t!ade in of T!uc) T!uc) K. on on 3ul" 3ul" %/ #$%: #$%: A. ;P.$/$$$<

9' P%$/$$$

C' ;P5$/$$$<

-' P%8$/$$$

.4' ?hat is is the net boo) boo) value value of the T!uc)s T!uc)s on -ecembe! -ecembe! .%/ .%/ #$%& A. P:%:/$$$

9' P.:4/$$$

C' P##4/6$$

-' P48:/$$$

.8' The total de(!eci de(!eciation ation e7(ense e7(ense !eco!ded !eco!ded fo! fo! the :="ea! :="ea! (e!iod (e!iod ;#$%:=#$%&< ;#$%:=#$%&< is ove!state ove!stated d b" A' P%46/6$$

9' P#56/6$$

C. P#4&/6$$

-' P#&6/6$$

:$' :$' The The boo) boo)ss have have not been close closed d fo! fo! #$%& #$%&'' ?hat ?hat is the the com(o com(oun und d +ou! +ou!na nall ent!" ent!" on -ecembe! .%/ #$%& to co!!ect the com(an",s e!!o!s fo! the :="ea! (e!iod ;#$%:=#$%&< A' Accumulated de(!eciation T!uc)s Retained ea!nings -e(!eciation e7(ense B. Accumulated de(!eciation T!uc)s Retained ea!nings -e(!eciation e7(ense C' Accumulated de(!eciation T!uc)s Retained ea!nings -' Accumulated de(!eciation T!uc)s

5#8/6$$ :4$/$$$ 8/6$$ %:$/$$$ 556/6$$ :4$/$$$ :6/6$$ %:$/$$$ 556/6$$ :4$/$$$ %46/6$$ 556/6$$ 556/6$$







Page %% PROBLEM NO. 6 The cash account of N1NAL COMPANY sho*s the follo*ing activities0 -ate Nov' .$ -ec' # : %6 #$ #% .% .%

-ebit 9alance Novembe! ban) cha!ges Nove Novemb mbe! e! ban ban) ) c!e c!edi ditt fo! fo! not notes es !eceivable collected NS2 chec) Loan (!oceeds -ecembe! ban) cha!ges Cash !ecei(ts boo) Cash disbu!sements boo)

C!edit P

%6$

P .$/$$$ ./8$$ %:6/6$$ %4$ #/%#%/8$$ %/##:/$$$

9alance P.:6/$$$ .::/46$ .&:/46$ .&$/86$ 6%5/:6$ 6%5/#&$ #/5.4/%&$ %/:%:/%&$

CASH BOOKS RECEIPTS -ate -ec' % # . : 6 4 8 %$ %% %# %6 %5 %& %4 %8 ## #. #. #. #5 #4 #4 #8 #8

OR No' %%$=%#$ %#%=%.5 %.&=%6$ %6%=%56 %55=%8$ %8%=#%$ #%%=#.# #..=#6$ #6%=#&6 #&5=.$$ .$%=.$8 .%$=.6$ .6%=.8$ .8%=:#$ :#%=:4$ :4%=6$$ 6$%=6#6 = = 6#5=666 665=5%% = 5%#=5.$ =

PAYMENTS Amount P ../$$$ 5./8$$ 5$/$$$ %54/$$$ %%&/$$$ %84/$$$ #5:/$$$ #.%/$$$ 5./$$$ 8$/$$$ %56/$$$ #:/$$$ 6&/$$$ #&/$$$ 6%/$$$ 5./$$$ 85/$$$ = = ###/$$$ %6/$$$ = %%:/$$$ =

Chec) No' 4$% 4$# 4$. 4$: 4$6 4$5 4$& 4$4 4$8 4%$ 4%% 4%# 4%. 4%: 4%5 4%& 4%4 4%8 4#$ 4#% 4## 4#. 4#: 4#6

Amount P 5/$$$ 8/$$$ ./$$$ 8/$$$ .5/$$$ 6&/$$$ &4/$$$ 8$/$$$ %4./$$$ #%/$$$ #:/$$$ :4/$$$ 5$/$$$ 55/$$$ %$4/$$$ ../$$$ %6$/$$$ #%/$$$ %#/$$$ 8/$$$ .5/$$$ .8/$$$ 4&/$$$ 5/$$$









Page %# BANK STATEMENT Date -ec' % # . : 6 4 8 %$ %% %# %6 %5 %& %4 %8 ## #. #. #. #5 #4 #4 #8 #8 #8 Totals

Che! &8# 4$# = 4$: EC 4$6 CM %5 &88 -M 6& 4$4 4$. 4$8 -M 5% 4%. CM #$ 4%6 4%5 4%% 4$% 4%: 4%4 -M %%# 4#% CM .5 4#$

Additional info!mation0 %' -Ms 5% and and %%# %%# a!e a!e fo! fo! se!vi se!vice ce cha!g cha!ges' es' #' EC is e!!o e!!o!! co! co!!e !ecte cted' d' .' -M 6& is is f n NS2 NS2 ch )'

Cha"#e$ P &/6$$ 8/$$$ = 8/$$$ #:./$$$ .5/$$$ = #%/%6$ .'8$$ 8$/$$$ ./$$$ %4./$$$ %4$ 5$/$$$ = %4/$$$ %$4/$$$ #:/$$$ 5/$$$ 55/$$$ %6$/$$$ .5$ 8/$$$ = %#/$$$ P%/$68/$8$

C"e%&t$ P #6/6$$ ../$$$ 5./8$$ 5$/$$$ #:./$$$ #46/$$$ .5/$$$ :5#/$$$ #.%/$$$ 5./$$$ = #66/$$$ #:/$$$ 6&/$$$ %:6/6$$ = %:%/$$$ = = 85/$$$ ###/$$$ = %6/$$$ .5/$$$ = P#/:8./8$$







Page %. 9ased on the (!eceding info!mation/ dete!mine the follo*ing0 :%' Outsta Outstandi nding ng chec) chec)ss at Novemb Novembe! e! .$ .$ A' P.8/%6$

B. P#4/56$

C' P#%/%6$

-' P:5/56$

C' P::%/$$$

-' P:4&/56$

C' P $

D. P#6/6$$

C' P%.#/$$$

-' P $

C' P.&6/$$$

D. P.&:/46$

:#' Outsta Outstandi nding ng chec) chec)ss at at -ecem -ecembe! be! .% A. P:68/$$$

9' P:&&/$$$

:.' -e(osi -e(ositt in t!an t!ansit sit at Nove Novembe mbe!! .$ A' P64/6$$

9' P%:6/6$$

::' -e(osi -e(ositt in t!an t!ansit sit at -ece -ecembe mbe!! .% A. P%%:/$$$

9' P%.8/6$$

:6' Ad+ust Ad+usted ed boo) boo) bala balance nce at at Novemb Novembe! e! .$ A' P:%$/46$

9' P.:6/$$$

:5' Ad+usted Ad+usted ban) !ecei(ts !ecei(ts fo! the month of -ecemb -ecembe! e! A' P#/#8&/:$$

9' P#/#8%/:$$

C. P#/.$./:$$

-' P#/.#%/:$$

:&' Ad+usted Ad+usted boo) boo) disbu!semen disbu!sements ts fo! fo! the month of -ecembe -ecembe!! A' P%/##4/::$

B. P%/#:5/::$

C' P%/#%$/::$

-' P%/#:5/5#$

C. P%/:.%/4%$

-' P%/&&5/4%$

C' P%/&&5/4%$

D. P.:#/$$$

:4' Ad+ust Ad+usted ed ban) ban) balan balance ce at -ecembe -ecembe!! .% A' P%/::8/4%$

9' P%/5&:/4%$

:8' 1nad+u 1nad+uste sted d ban) ban) balanc balance e at Novem Novembe! be! .$ .$ A' P666/$5$

9' P8:/65$







Page %: PROBLEM NO. ' MNA MNN CO' has acDui!ed a t!act of mine!al land fo! fo! P6$/$$$/$$$' Mina Mining estimates estimates that the acDui!ed (!o(e!t" *ill "ield %6$/$$$ tons of o!e *ith sufficient mine!al content to ma)e mining and (!ocessing (!ofitable' (!ofitable' t fu!the! estimates that &/6$$ tons of o!e o!e *ill be mined the fi!st fi!st and last "ea! and %6/$$$ %6/$$$ tons eve!" eve!" "ea! in bet*een' bet*een' ;Assum ;Assume e %% "ea!s "ea!s of mining mining o(e!ations'< The land *ill have a !esidual value of P%/66$/$$$' Mina Mining builds necessa!" st!uctu!es and sheds on the site at a total cost of P%#/$$$/$$$' The com(an" estimates that these st!uctu!es can be used fo! %6 "ea!s but/ because the" must be dismantled dismantled if the" a!e to be moved/ moved/ the" have no !esidual !esidual value' value' Mina Mining Mining does not intend to use the buildings else*he!e' Mini Mining ng ma machi chine ne!" !" insta install lled ed at the the mine mine *as *as (u!ch (u!chas ased ed secon secondh dhan and d at a tota totall cost cost of P./5$$/$$$' The machine!" cost the fo!me! o*ne! P8/$$$/$$$ and *as 6$@ de(!eciated de(!eciated *hen (u!chased' Mina Mining estimates estimates that about half of this machine!" machine!" *ill still be useful *hen the (!esent mine!al !esou!ces have been e7hausted but that dismantling and !emoval costs *ill +ust about about offset offset its value value at that that time' time' The com(an" com(an" does does not intend intend to use the machine!" machine!" else*h else*he!e e!e'' The !em !emain aining ing machine! machine!" " *ill *ill last last until until about about one=ha one=half lf the (!esent (!esent estima estimated ted mine!al mine!al o!e has been !emoved !emoved and *ill then be *o!thless' *o!thless' Cost is to be allocated allocated eDuall" eDuall" bet*een these t*o classes of machine!"' 6%' 6%' ?ha ?hat a!e a!e the the e$t&(ate% de(letion e$t&(ate% de(letion and de(!eciation cha!ges fo! the % st "ea! -e(letion -e(!eciation A' P:/4:6/$$$ P4&$/$$$ 9' P:/4:6/$$$ P&4$/$$$ P#/:##/6$$ P4&$/$$$ C. -' P#/:##/6$$ P&4$/$$$ 6#' 6#' ?ha ?hat a!e a!e the the e$t&(ate% de(letion e$t&(ate% de(letion and de(!eciation cha!ges fo! the 6 th "ea! -e(letion -e(!eciation A' P#/:##/6$$ P%/&:$/$$$ 9' P#/:##/6$$ P%/65$/$$$ C P: 4:6 $$$ P% 65$ $$$







Page %6 PROBLEM NO. ) The H>R Com(an" included the follo*ing in its notes !eceivable on -ecembe! .%/ #$%&0 Note !eceivable f!om sale of land Note !eceivable f!om consultation Note !eceivable f!om sale of eDui(ment

P#/5:$/$$$ ./5$$/$$$ :/4$$/$$$

The follo*ing t!ansactions du!ing #$%& and othe! info!mation !elate to the com(an",s notes !ececeivable0 a< On 3anua! 3anua!" " %/ #$%&/ #$%&/ H>R Com(an Com(an" " sold a t!act t!act of land land to T!i(le T!i(le G Com(a Com(an"' n"' The land/ land/ (u!chas (u!chased ed %$ "ea!s "ea!s ago/ *as ca!!ied ca!!ied on H>R,s boo)s boo)s at P%/6$$/ P%/6$$/$$$ $$$'' H>R H>R !eceiv !eceived ed a noninte!est= noninte!est=bea!i bea!ing ng note fo! P#/5:$/$$$ P#/5:$/$$$ f!om T!i(le G' The note is due on -ecembe! -ecembe! .%/ #$%4' The!e *as no established established e7change (!ice fo! the land' The (!evailing (!evailing inte!est !ate fo! this note on 3anua!" %/ #$%& *as %$@' b< On 3anua!" 3anua!" %/ #$%&/ H>R Com(an" Com(an" !eceived !eceived a 6@/ P./5$$/$$ P./5$$/$$$ $ (!omisso!" (!omisso!" note in e7change e7change fo! the consultation consultation se!vices se!vices !ende!ed' !ende!ed' The note *ill matu!e matu!e on -ecembe! .%/ #$%8/ *ith inte!e inte!est st !eceiva !eceivable ble eve!" eve!" -ecemb -ecembe! e! .%' The fai! value value of the se!vice se!vicess !en !ende! de!ed ed is not !eadil" !eadil" dete!minabl dete!minable' e' The (!evailing (!evailing !ate of inte!est inte!est fo! a note of this t"(e *as %$@ on 3anua!" %/ #$%&' c< On 3anua! 3anua!" " %/ #$%&/ #$%&/ H>R H>R Com( Com(an an" " sold sold an old old eDui eDui(m (men entt *ith *ith a ca!!" ca!!"in ing g am amou ount nt of P:/4$$/$$$/ !eceiving P&/#$$/$$$ note' The note bea!s an inte!est !ate !ate of :@ and is to be !e(aid in . annual installments of P#/:$$/$$$ ;(lus inte!est on the outstanding balance<' H>R !eceived !eceived the fi!st (a"ment (a"ment on -ecembe! .%/ #$%&' The!e is no established established ma!)et ma!)et value fo! the eDui(ment' The ma!)et inte!est !ate fo! simila! simila! notes *as %:@ on 3anua!" %/ #$%&' decimal (laces and final ans*e!s to the nea!est N*te+ Round off (!esent value facto!s to fou! decimal hund!ed'

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