AUDITING PROBLEMS PROBLEM NO. 1
You You are are engaged in the regular regular annual examination examination o o the a!!ount" a!!ount" and re!ord" re!ord" o o PRT# PRT# Manua!turing #o$ or the %ear ended De!em&er '() *+(*$ To redu!e the ,or-load at %ear end) the !om.an%) u.on %our re!ommendation) too- it" annual .h%"i!al in/entor% on No/em&er '+) *+(*$ You o&"er/ed the ta-ing o the in/entor% and made te"t" o the in/entor% !ount and the in/entor% re!ord"$ The !om.an%0" !om.an%0" in/entor% in/entor% a!!ount) a!!ount) ,hi!h in!lude" ra, ra, material" material" and ,or-1in1.ro ,or-1in1.ro!e"" !e"" i" on .er.etual &a"i"$ In/entorie" are /alued at !o"t) 2r"t1in) 2r"t1out method$ There i" no 2ni"hed good" in/entor%$ The !om.an%0" !om.an%0" .h%"i!al in/entor% in/entor% re/ealed re/ealed that that the &oo- in/entor% in/entor% o P()345)43+ P()345)43+ ,a" under"tated &% P67)+++$ To To a/oid dela% dela% in !om.leting !om.leting it" monthl% 2nan!ial 2nan!ial "tatement") "tatement") the !om.an% !om.an% de!ided de!ided not to ad8u"t the &ooin/entor% until %ear1end ex!e.t or o&"olete in/entor% item"$ Your Your examination examination di"!lo"ed di"!lo"ed the ollo,ing ollo,ing inormation inormation regardi regarding ng the No/em&er No/em&er '+ in/entor% in/entor%9 aPri!ing te"t" "ho,ed that the .h%"i!al in/entor% ,a" o/er"tated &% P3()3++$ $ An under"tatement o the .h%"i!al in/entor% &% P7)*++ due to error" in ooting" &and exten"ion"$ $ Dire!t la&or in!luded in the in/entor% amounted to P*6+)+++$ O/erhead ,a" !in!luded at the rate o *++: o $ dire!t la&or$ You ha/e a"!ertained that the amount o dire!t la&or ,a" !orre!t and that the o/erhead rate ,a" .ro.er$ The .h%"i!al .h%"i!al in/entor% in!luded in!luded o&"olete o&"olete material" material" ,ith a total total !o"t o P;)+++$ P;)+++$ d $ During De!em&er) the o&"olete material" ,ere ,ritten o< &% a !harge to !o"t o "ale"$ Your Your audit al"o di"!lo"ed the the ollo,ing inormat inormation ion a&out the De!em&er De!em&er '( in/entor%9 Total Total de&it" to the ollo,ing ollo,ing a!!ount" a!!ount" during De!em&er De!em&er ,ere9 ,ere9 a $ #o"t o "ale" P()4*+)6++ Dire!t la&or ''6)6++ Pur!ha"e" 34()3++ The !o"t o "ale" o P()4*+)6++ P()4*+)6++ in!luded dire!t dire!t la&or o o P'63)7++$ & $
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) determine the ollo,ing9 Ad8u"ted amount o .h%"i!al in/entor% at No/em&er '+) *+(* (
#o"t o material" on hand) and material" in!luded in ,or- in .ro!e"" a" o De!em&er '() *+(* ' $ a$ P6(4)53+ !$ P;*6)53+ &$ P6(*)53+ d$ P47*);3+ The amount amount o dire!t dire!t la&or in!luded in!luded in ,or- in .ro!e"" .ro!e"" a" o De!em&er De!em&er '() *+(* 7 $ a$ P3(6)6++ !$ P''6)6++ &$ P*'*)7++ d$ P'63)7++ The amount amount o a!tor% a!tor% o/erhead o/erhead in!luded in ,or- in .ro!e"" .ro!e"" a" o De!em&er De!em&er '() *+(* 5 $ a$ P ;;*)6++ &$ P()*';)3++
c. P464,800
d$ P;;;)
3
PROBLEM NO. 2
PRT# #om.an%=" .ro.ert%) .lant) and e>ui.ment) a!!umulated de.re!iation) and amorti?ation &alan!e" at De!em&er '() *+(( are9 A!!umulated Land Building" Ma!hiner% and e>ui.ment Automo&ile and tru!-" Lea"ehold im.ro/ement" Total"
#o"t de.re!iation P *;5)+++ *)6++)++ P 3;*)4++ '3;)5++ + ((7)'*3 ()'6+)++ + (+6)+++ *(+)++ P()*3*);*3 + 7'*)++ + P5)+4;)++ +
Additional inormation on de.re!iation) amorti?ation method") and u"eul li/e" ollo,"9 De.re!iation A""et method U"eul lie Building" (5+:1 *5 %ear"$ de!lining1 &alan!e (+ %ear" Ma!hiner% and e>ui.ment "traight1 5 %ear" Automo&ile and line tru!-" (5+:1 @all a!>uired de!lining1 ater *++4 &alan!e Lea"ehold "traight1 im.ro/ement" line De.re!iation i" !om.uted to the neare"t month$ Sal/age /alue" o de.re!ia&le a""et" are immaterial ex!e.t or automo&ile" and tru!-" ,hi!h ha/e e"timated "al/age /alue" e>ual to (5: o !o"t$ Other additional information: •
•
•
PRT# entered into a t,el/e1%ear o.erating lea"e "tarting anuar% () *++4$ The lea"ehold im.ro/ement" ,ere !om.leted on De!em&er '() *++6 and the a!ilit% ,a" o!!u.ied on anuar% () *++4$ •
•
On anuar% 3) *+(*) PRT# !om.leted it" "el1!on"tru!tion o a &uilding on it" o,n land$ Dire!t !o"t" o !on"tru!tion ,ere P()+45)+++$ #on"tru!tion o the &uilding re>uired (5)+++ dire!t la&or hour"$ PRT#=" !on"tru!tion de.artment ha" an o/erhead allo!ation "%"tem or out"ide 8o&" &a"ed on an a!ti/it% denominator o (++)+++ dire!t la&or hour") &udgeted 2xed !o"t" o P*)5++)+++) and &udgeted /aria&le !o"t" o P*; .er dire!t la&or hour$ •
•
On ul% () *+(*) ma!hiner% and e>ui.ment ,ere .ur!ha"ed at a total in/oi!e !o"t o P'*5)+++$ Additional !o"t" o P*')+++ to re!ti% damage on deli/er% and P(6)+++ or !on!rete em&edding o ma!hiner% ,ere in!urred$ A ,all had to &e demoli"hed to ena&le a large ma!hine to &e mo/ed into the .lant$ The ,all demolition !o"t P;)+++) and re&uilding o the ,all !o"t P(4)+++$ On Augu"t '+) *+(*) PRT# .ur!ha"ed a ne, automo&ile !o"ting P*5)+++$ On Se.tem&er '+) *+(*) a tru!- ,ith a !o"t o P76)+++ and a !arr%ing amount o P'+)+++ on De!em&er '() *+(( ,a" "old or P*')5++$ On No/em&er 7) *+(*) PRT# .ur!ha"ed a tra!t o land or in/e"tment .ur.o"e" or P;++)+++$ PRT# thin-" it might u"e the land a" a .otential uture &uilding "ite$ On De!em&er *+) *+(*) a ma!hine ,ith a !o"t o P(;)+++) a !arr%ing amount o P*)4;5 on date o di".o"ition) and a mar-et /alue o P7)+++ ,a" "old to a !or.orate oC!er
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) !om.ute or the ollo,ing a" o and or the %ear ended De!em&er '() *+(*9 Total de.re!iation 3 $ a$ P73+)**6 !$ P7;+)5*6 &$ P73*)3;6 d$ P73()5*6 #arr%ing amount o &uilding" ; $ a$ P')7+4)7;7 !$ P')+*6);;7 &$ P');3()4;7 d$ P')'6()*;7 #arr%ing amount o ma!hiner% and e>ui.ment 6 $ a$ P()(4;)';5 !$ P()*7')4*5 &$ P()(6+)*;5 d$ P()***)+;5 #arr%ing amount o automo&ile" and tru!-" 4 $ a$ P36)7;* &$ P54)7;*
!$ P3();** d$ P5*);**
(+$ #arr%ing amount o .ro.ert%) .lant and e>ui.ment a$ P5)3';)';( !$ P5)3(5)5*( &$ P5)3+6);;( d$ P5)54+)6*( PROBLEM NO. 3
You noted the ollo,ing item" relati/e to the !om.an%0" Intangi&le a""et" in !onne!tion ,ith %our audit o the PRT# #or.oration0" 2nan!ial "tatement" or the %ear *+(*$ Franchise
On anuar% () *+(*) PRT# "igned an agreement to o.erate a" ran!hi"ee o #lear #o.% Ser/i!e) In!$ or an initial ran!hi"e o P36+)+++$ O thi" amount) P*++)+++ ,a" .aid ,hen the agreement ,a" "igned and the &alan!e ,a" .a%a&le in our annual .a%ment" o P(*+)+++ ea!h) &eginning anuar% () *+('$ The agreement .ro/ide" that the
do,n .a%ment i" not reunda&le and no uture "er/i!e" are re>uired o the ran!hi"or$ The im.li!it rate or loan o thi" t%.e i" (7:$ The agreement al"o .ro/ide" the 5: o the re/enue rom the ran!hi"e mu"t &e .aid to the ran!hi"or annuall%$ PRT#0" re/enue rom the ran!hi"e or *+(* ,a" P6)+++)+++$ PRT# e"timate" the u"eul lie o the ran!hi"e to &e ten %ear"$ Patent
On ul% () *+(*) PRT# .ur!ha"ed a .atent rom the in/entor) ,ho a"-ed P()(++)+++ or it$ PRT# .aid or the .atent a" ollo,"9 !a"h) P7++)+++ i""uan!e o (+)+++ "hare" o it" o,n ordinar% "hare") .ar P(+ @mar-et /alue) P*+ .er "hare and a note .a%a&le due at the end o three %ear") a!e amount) P5++)+++) nonintere"t1&earing$ The !urrent intere"t rate or thi" t%.e o 2nan!ing i" (* .er!ent$ PRT# e"timate" the u"eul lie o the .atent to &e ten %ear"$ Trademark
PRT# .ur!ha"ed or P()*++)+++ a trademar- or a /er% "u!!e""ul "ot drin- it mar-et" under the name POERF$ The trademar- ,a" determined to ha/e an inde2nite lie$ A !om.etitor re!entl% introdu!ed a .rodu!t that i" in dire!t !om.etition ,ith the POERF .rodu!t) thu" "ugge"ting the need or an im.airment te"t$ Data gathered &% the entit% "ugge"t" that the u"eul lie o the trademar- i" "till inde2nite) &ut the !a"h o," ex.e!ted to &e generated &% the trademar- ha/e &een redu!ed either to P7+)+++ .er %ear @,ith a .ro&a&ilit% o ;+: or to P6+)+++ .er %ear @,ith '+: .ro&a&ilit%$ The a..ro.riate ri"-1ree intere"t rate i" 5:$ The a..ro.riate ri"-1 ad8u"ted intere"t rate i" (+:
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) determine the ollo,ing9 (Round o resent !alue factors to " decimal laces# (($ Total ex.en"e" related to ran!hi"e in *+(* a$ P5+')4(7 !$ P776)45+ &$ P5'5)*++ d$ P757)437 (*$ #arr%ing amount o ran!hi"e a" o De!em&er '() * +(* a$ P574)377 !$ P5'6);'' &$ P747)36+ d$ P3(*)+++ ('$ #arr%ing amount o .atent a" o De!em&er '() *+(* a$ P()+75)+++ !$ P63+)'(+ &$ P 455)4++ d$ P4+6)(+5 (7$ Total ex.en"e" related to the intangi&le a""et" in *+(* a$ P33*);54 !$ P;'')+3' &$ P;(();+4 d$ P6+*)*(* (5$ In auditing intangi&le a""et") an auditor mo"t li-el% ,ould re/ie, or re!om.ute amorti?ation and determine ,hether the amorti?ation .eriod i" rea"ona&le in "u..ort o management0" 2nan!ial "tatement a""ertion o a$ Haluation$ !$ #om.letene""$ &$ Exi"ten!e or d$ Right"$ o!!urren!e$ PROBLEM NO. 4
You are !ondu!ting an audit o the PRT# #om.an% or the %ear ended De!em&er '() *+(*$ The internal !ontrol .ro!edure" "urrounding !a"h tran"a!tion" ,ere not ade>uate$ The &oo--ee.er1!a"hier handle" !a"h re!ei.t") maintain" a!!ounting re!ord") and .re.are" the monthl% &anre!on!iliation"$ The &oo--ee.er1!a"hier .re.ared the ollo,ing re!on!iliation at the end o the %ear9
Balan!e .er &an"tatement Add9 De.o"it in tran"it
P'5+)+++ P(;5)*5 +
Note !olle!ted &% &an Total
Le"" out" tand
ing !he!-" Balan!e .er general ledger
(4+)* 5+ *73);5+ 5+ 57+)* P*4')5++
(5)+++
In the .ro!e"" o %our audit) %ou gathered the ollo,ing9 At De!em&er '() *+(*) the &an- "tatement and general ledger "ho,ed &alan!e" o P'5+)+++ and P*4')5++) re".e!ti/el%$
•
The !ut1o< &an- "tatement "ho,ed a &an- !harge on anuar% *) *+(' or P'+)+++ re.re"enting !orre!tion o an erroneou" &an- !redit$ •
•
In!luded in the li"t o out"tanding !he!-" ,ere the ollo,ing9 aA !he!- .a%a&le to a "u..lier) dated De!em&er *4) *+(*) in the amount $o P(7);5+) relea"ed on anuar% 5) *+('$ &A !he!- re.re"enting ad/an!e .a%ment to a "u..lier in the amount o $P';)*(+) the date o ,hi!h i" anuar% 7) *+(') and relea"ed in De!em&er) *+(*$ On De!em&er '() *+(*) the !om.an% re!ei/ed and re!orded !u"tomer0" .o"tdated !he!- amounting to P5+)+++
•
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) an",er the ollo,ing9 (3$ The ad8u"ted de.o"it in tran"it a" at De!em&er '() *+(* i" a$ P(;5)*5+ !$ P**5)*5+ &$ P(*5)*5+ d$ P(*5)+++ (;$ The ad8u"ted out"tanding !he!-" a" at De!em&er '() *+(* i" a$ P*46);(+ !$ P*+4)57+ &$ P*'*)+++ d$ P(47);4+ (6$ The ad8u"ted !a"h to &e .re"ented in the "tatement o 2nan!ial .o"ition at De!em&er '() *+(* i" a$ P*'5)73+ !$ P*35)73+ &$ P*5+)73+ d$ P'(+)73+ (4$ The !a"h "hortage a" o De!em&er '() *+(* i" !$ P3+)+++ a$ P75)+++ d$ P 6)+7+ &$ P56)+7+ *+$ The net ad8u"tment to the !a"h a!!ount a" o De!em&er '() *+(* i" a$ P7')+7+ !$ P56)+7+ &$ P3+)+++ d$ P75)+++ PROBLEM NO. 5
On anuar% () *+(*) PRT# #om.an% "old land that originall% !o"t P7++)+++ to Bu%er #om.an%$ A" .a%ment) Bu%er ga/e PRT# #om.an% a P3++)+++ note$ The note &ear" an intere"t rate o 7: and i" to &e re.aid in three annual in"tallment" o P*++)+++ @.lu" intere"t on the out"tanding &alan!e$ The 2r"t .a%ment i" due on De!em&er '() *+(*$ The mar-et .ri!e o the land i" not relia&l% determina&le$ The .re/ailing rate o intere"t or note" o thi" t%.e i" (7: on anuar% () *+(* and (5: on De!em&er '() *+(*$ PRT# made the ollo,ing 8ournal entrie" in relation to the "ale o land and the related note re!ei/a&le9 anuar% () *+(* land Note" re!ei/a&le Land Gain on "ale o
De!em&er '() *+(* #a"h Note" re!ei/a&le
Intere"t in!ome
P3++)+++ P7++)+++ *++)+++
P**7)+++ P*++)+++ *7)+++ PRT# re.orted the note" re!ei/a&le in it" "tatement o 2nan!ial .o"ition at De!em&er '() *+(* a" .art o trade and other re!ei/a&le"$ QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) an",er the ollo,ing9 *($ The !orre!t gain on "ale o land i" a$ P(+')(+5 !$ P(*+)+3( &$ P 47)636 d$ P*++)+++ **$ Pro2t or *+(* i" o/er"tated &% a$ P5+)73+ &$ P'()('+
!$ P57)4+* d$ P
*'$ The entit%0" ,or-ing !a.ital at De!em&er '() *+(* i" o/er"tated &% a$ P*'5);35 !$ P(6*)7;3 &$ P*'*)4'3 d$ P + *7$ All o the ollo,ing are exam.le" o "u&"tanti/e te"t" to /eri% /aluation o net a!!ount" re!ei/a&le ex!e.t the aRe1!om.utation o the allo,an!e or &ad de&t"$ $In".e!tion o a!!ount" or !urrent /er"u" non1!urrent "tatu" in the &"tatement o 2nan!ial .o"ition$ $In".e!tion o the aging "!hedule and !redit re!ord" o .a"t due !a!!ount"$ $#om.ari"on o the allo,an!e or &ad de&t" ,ith .a"t re!ord"$ d $ *5$ #on2rmation) ,hi!h i" a ".e!i2! t%.e o in>uir%) i" the .ro!e"" o o&taining a re.re"entation o inormation or o an exi"ting !ondition dire!tl% rom a third .art%$ T,o a""ertion" or ,hi!h !on2rmation o a!!ount" re!ei/a&le &alan!e" .ro/ide" .rimar% e/iden!e are a$ #om.letene"" and /aluation &$ Right" and o&ligation" and exi"ten!e !$ Haluation and right" and o&ligation" d$ Exi"ten!e and !om.letene"" PROBLEM NO. 6
You ,ere engaged &% PRT# #or.oration) a "mall and medium1"i?ed entit%) to audit it" 2nan!ial "tatement" or the %ear *+(*$ During the !our"e o %our audit) %ou noted the ollo,ing regarding it" re!ent a!>ui"ition" o in/e"tment" in e>uit% "e!uritie"9 On ( anuar% *+(* the entit% a!>uired *5 .er !ent o the e>uit% o ea!h o aentitie" B) # and D or P(+ million) P(5 million and P*6 million re".e!ti/el%$ Tran"a!tion !o"t" o ( .er !ent o the .ur!ha"e .ri!e o the "hare" ,ere in!urred &% the entit%$ & On * anuar% *+(* entit% B de!lared and .aid di/idend" o P( million or the %ear ended *+(($ On '( De!em&er *+(* entit% # de!lared a di/idend o P6 million or the !%ear ended *+(*$ The di/idend de!lared &% entit% # ,a" .aid in *+('$
d or the %ear ended '( De!em&er *+(*) entitie" B and # re!ogni?ed .ro2t o re".e!ti/el% P5 million and P(6 million$ Jo,e/er) entit% D re!ogni?ed a lo"" o P*+ million or that %ear$ e Pu&li"hed .ri!e >uotation" do not exi"t or the "hare" o entitie" B) # and D$ U"ing a..ro.riate /aluation te!hni>ue" the entit% determined the air /alue o it" in/e"tment" in entitie" B) # and D at '( De!em&er *+(* a" P(' million) P*4 million and P(5 million re".e!ti/el%$ #o"t" to "ell are e"timated at 5 .er !ent o the air /alue o the in/e"tment"$ The entit% ha" no "u&"idiarie" and thereore doe" not .rodu!e !on"olidated 2nan!ial "tatement"$
In a!!ordan!e ,ith "e!tion (7$7 o the PRS or SME") an in/e"tor "hall a!!ount or all o it" in/e"tment" in a""o!iate" u"ing one o the ollo,ing9 @a the !o"t model in .aragra.h (7$5) @& the e>uit% method in .aragra.h (7$6) or @! the air /alue model in .aragra.h (7$4$ The entit% i" "ee-ing %our ad/i!e on the e
*3$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the !o"t model) the total !arr%ing amount o the in/e"tment" "hould &e a$ P7+$*5 million !$ P'4$*5 million &$ P5'$*6 million d$ P'4$5+ million *;$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the !o"t model) the net amount to &e re!ogni?ed in .ro2t or lo"" "hould &e a$ P@(($;6 million !$ P@(($+' million &$ P@(*$+' million d$ P *$*5 millio
n
*6$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the e>uit% method) the total !arr%ing amount o the in/e"tment" "hould &e a$ P5*$+' million !$ P7*$;5 million &$ P7'$++ million d$ P7'$;5 million *4$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the e>uit% method) the net amount to &e re!ogni?ed in .ro2t or lo"" "hould &e a$ P@6$*6 million !$ P@;$5' million &$ P@6$5' million d$ P+$;5 million '+$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the air /alue model) the net amount to &e re!ogni?ed in .ro2t or lo"" "hould &e a$ P5$;* million !$ P*$6; million &$ P5$7; million d$ P7$++ million PROBLEM NO. 7
PRT# #or.oration i" "elling audio and /ideo a..lian!e"$ The !om.an%0" 2"!al %ear end" on Mar!h '($ The ollo,ing inormation relate" to the o&ligation" o the !om.an% a" o Mar!h '() *+(*9 Note" .a%a&le PRT# ha" "igned "e/eral note" ,ith 2nan!ial in"titution"$ The maturitie" o the"e note" are gi/en &elo,$ The total un.aid intere"t or all o the"e note" amount" to P'7+)+++ on Mar!h '() *+(*$ Amount P ;++)+++ Due date 4++)+++ A.ril '() *+(* 6++)+++ ul% '() *+(* ()*++)+++ e&ruar% () *+(' ()5++)+++ A.ril '+) *+(' une '+) *+(' P 5)(++)+++ E"timated ,arrantie" PRT# ha" a one1%ear .rodu!t ,arrant% on "ome "ele!ted item"$ The e"timated ,arrant% lia&ilit% on "ale" made during the *+(+ K *+(( 2"!al %ear and "till out"tanding a" o Mar!h '() *+(() amounted to P*5*)+++$ The ,arrant% !o"t" on "ale" made rom A.ril () *+(( to Mar!h '() *+(*) are e"timated at P3'+)+++$ The a!tual ,arrant% !o"t" in!urred during *+(( K *+(* 2"!al %ear are a" ollo,"9
arrant% !laim" honored on *+(+ K *+(( "ale" P *5*)+++ arrant% !laim" honored on *65)+++ *+(( K *+(* "ale" P 5';)+++ Total Trade .a%a&le" A!!ount" .a%a&le or "u..lie") good") and "er/i!e" .ur!ha"e" on o.en a!!ount amount to P53+)+++ a" o Mar!h '() *+(*$ Di/idend" On Mar!h (+) *+(*) PRT#0" &oard o dire!tor" de!lared a !a"h di/idend o P+$'+ .er ordinar% "hare and a (+: ordinar% "hare di/idend$ Both di/idend" ,ere to &e di"tri&uted on A.ril 5) *+(* to ordinar% "hareholder" on re!ord at the !lo"e o &u"ine"" on Mar!h '() *+(*$ A" o Mar!h '() *+(*) PRT# ha" 5 million) P* .ar /alue) ordinar% "hare" i""ued and out"tanding$ Bond" .a%a&le PRT# i""ued P5)+++)+++) (*: &ond") on O!to&er () *++3 at 43$ The &ond" ,ill mature on O!to&er () *+(3$ Intere"t i" .aid "emi1annuall% on O!to&er ( and A.ril ($ PRT# u"e" the "traight line method to amorti?e &ond di"!oun
t
QUESTIONS:
Ba"ed on the oregoing inormation) determine the ad8u"ted &alan!e" o the ollo,ing a" o Mar!h '() *+(*9 '($ E"timated ,arrant% .a%a&le a$ P*5*)+++ !$ P3'+)+++ &$ P'75)+++ d$ P66*)+++ '*$ Unamorti?ed &ond di"!ount a$ P((+)+++ &$ P(++)+++ ''$ Bond intere"t .a%a&le a$ 0 P &$ P'++)+++ '7$ Total !urrent lia&ilitie" a$ P3)775)+++ &$ P5)(+5)+++ '5$ Total non!urrent lia&ilitie" a$ P;);++)+++ &$ P;)5++)+++
!$ P*++)+++ d$ P 4+)+++
!$ P(5+)+++ d$ P*5+)+++
!$ P5)775)+++ d$ P')475)+++
!$ P;)54+)+++ d$ P;)3(+)+++
PROBLEM NO. 8
The "hareholder"0 e>uit% "e!tion o the PRT# #or.oration0" "tatement o 2nan!ial .o"ition a" o De!em&er '() *+(( i" .re"ented &elo,9 P *;+)+++ (*: Preeren!e "hare !a.ital) ()546)7++ P(++ .ar '3)6++ Ordinar% "hare !a.ital) P*+ *'5)*++ .ar ')*++ Share .remium K .reeren!e ()565)67+ Share .remium K ordinar% P');*4)77+ Share .remium K trea"ur% "hare" Retained earning" Total "hareholder"0 e>uit%
PRT# had 35)+++ ordinar% "hare" a" De!em&er '() *+(+$
The ollo,ing "hareholder"0 e>uit% tran"a!tion" ,ere re!orded in *+(( and *+(*9 *+(( Ma% (
-
ul% (
-
ul$ '(
-
Aug$ '+
-
De!$ '(
-
*+(* e&$ ( Ma% ( Ma% '(
-
Sold 4)+++ ordinar% "hare" or P*7) .ar /alue P*+$ Sold ;++ .reeren!e "hare" or P(*7) .ar /alue P(++$ I""ued an 6: "hare di/idend on ordinar% "hare"$ The mar-et /alue o ordinar% "hare ,a" P'+ .er "hare$ De!lared !a"h di/idend" o (*: on .reeren!e "hare" and P' .er "hare on ordinar% "hare"$ Pro2t or the %ear amounted to P()'75)+7+$
Sold *)*++ ordinar% "hare" or P'+$ Sold 3++ .reeren!e "hare" or P(*6$ I""ued a *1or1( ".lit o ordinar% "hare"$ The .ar /alue o the ordinar% "hare ,a
"
*+(* Se.$ (
-
O!t$ (
-
No/$ (
-
De!$ '(
-
redu!ed to P(+ .er "hare$ Pur!ha"ed ()+++ ordinar% "hare" or P(6 to &e held a" trea"ur% "hare"$ De!lared and .aid !a"h di/idend" o (*: on .reeren!e "hare" and P7 .er "hare on ordinar% "hare"$ Sold ()+++ "hare" o trea"ur% "hare" or P**$ Pro2t or the %ear amounted to P44()5*+$
QUESTIONS:
Determine the amount") a" re>uired) in PRT# #or.oration0" !om.arati/e 2nan!ial "tatement" a" o and or the %ear" ended De!em&er '() *+(( and *+(*$ '3$ Di/idend" .aid to ordinar% "hareholder" in *+(* a$ P35*)34+ !$ P35*)43+ &$ P34*)53+ d$ P353)43+ ';$ Retained earning" a" o De!em&er '() *+(* a$ P()66+)6++ !$ P()64*)+++ &$ P()667)6++ d$ P()666)+++ '6$ Total e>uit% a" o De!em&er '() *+(* a$ P7)(;5)*++ &$ P7)(;()*++ '4$ Ba"i! earning" .er "hare or *+(( a$ P(;$(* &$ P 6$*( 7+$ Ba"i! earning" .er "hare or *+(* a$ P;$7+ &$ P;$'7
!$ P7)(6*)7++ d$ P7)(5;)*++
!$ P 6$53 d$ P(6$74
!$ P5$63 d$ P5$6(
PROBLEM NO. 9
PRT# #or.oration) a non.u&li! entit%) ,a" in!or.orated on De!em&er () *+(() and &egan o.eration" one ,eelate !lo"ing the &oo-" or the 2"!al %ear ended No/em&er '+) *+(*) the !ontroller .re.ared the ollo,ing 2nan!ial "tatement"9 PRT# #or.oration
Statement o inan!ial Po"ition No/em&er '+) *+(* A""et" #urrent a""et"9 #a"h Mar-eta&le "e!uritie" ) at !o"t A!!ount" re!ei/a&le Allo,an!e or dou&tul a!!ount" In/entorie" Pre.aid in"uran!e Total !urrent a""et" Pro.ert%) .lant and e>ui.ment Le"" a!!umulated de.re!iation Pro.ert%) .lant and e>ui.ment) net Re"ear!h and de/elo.ment !o"t" Total a""et"
P (5+)+++ 3+)+++ 75+)+++ @ 54)+++ 7'+)+++ (5)+++ ()+73)+++ 7*3)+++ @ 7+)+++ '63)+++ (*+)+++ P()55*)++
+
Lia&ilitie" and Shareholder"= e>uit% #urrent lia&ilitie"9 A!!ount" .a%a&le P 54*)+++ and a!!rued **7)+++ ex.en"e" 6(3)+++ In!ome taxe" .a%a&le 7++)+++ Total !urrent ''3)+++ lia&ilitie" ;'3)+++ Shareholder"= e>uit%9 P()55*)+++ Share !a.ital) P(+ .ar /alue Retained earning" Total "hareholder"= e>uit% Total lia&ilitie" and "hareholder"= e>uit% PRT# #or.oration Statement o In!ome or the i"!al Year Ended No/em&er '+) *+(* P*)45+)+++ Net "ale" O.erating ex.en"e"9 #o"t o "ale" Selling and admini"trati/e De.re!iation Re"ear!h and de/elo.ment
()3;+)+++ 35+)+++ 7+)+++ '+)+++ *)'4+)+++ 53+)+++ **7 +++ P ''3)+++
In!ome &eore in!ome taxe" Pro/i"ion or in!ome taxe" Net in!ome
PRT# i" in the .ro!e"" o negotiating a loan or ex.an"ion .ur.o"e") and the &an- ha" re>ue"ted audited 2nan!ial "tatement"$ During the !our"e o the audit) the ollo,ing additional inormation ,a" o&tained9 &$ a $ !$
The in/e"tment .ortolio !on"i"t" o "hort1term in/e"tment" in mar-eta&le e>uit% "e!uritie" ,ith a total d $mar-et /aluation o P55)+++ a" o No/em&er '+) *+(*$ Ba"ed on an aging o the a!!ount" re!ei/a&le a" o No/em&er '+) *+(*) it ,a" e"timated that P'3)+++ o the e $re!ei/a&le" ,ill &e un!olle!ti&le$ In/entorie" at No/em&er '+) *+(* did not in!lude ,or- in .ro!e"" in/entor% !o"ting P(*)+++) "ent to an $out"ide .ro!e""or on No/em&er *4) *+(*$ A P')+++ in"uran!e .remium .aid on No/em&er '+) *+(* on a .oli!% ex.iring one %ear later ,a" !harged to in"uran!e ex.en"e$ g $ PRT# ado.ted a .en"ion .lan on une () *+(* or eligi&le em.lo%ee" to &e admini"tered &% a tru"tee$ Ba"ed u.on a!tuarial !om.utation") the 2r"t t,el/e month"= normal .en"ion ,a" e"timated at P75)+++$ h $ On une () *+(*) a .rodu!tion ma!hine .ur!ha"ed or P*7)+++ ,a" !harged to re.air" and maintenan!e$ PRT# de.re!iate" ma!hine" o thi" t%.e on the "traight1line method o/er a 2/e1%ear lie ,ith no "al/age /alue) i $or 2nan!ial and tax .ur.o"e"$ Re"ear!h and de/elo.ment !o"t" o P(5+)+++ ,ere in!urred the de/elo.ment o a .atent) ,hi!h PRT# ex.e!t" to &e granted during the 2"!al %ear ending No/em&er '+) *+('$ PRT# initiated a 2/e1%ear amorti?ation o the P(5+)+++ total !o"t during the 2"!al %ear ended No/em&er '+) *+(*$ During De!em&er *+(*) a !om.etitor !om.an% 2led "uit again"t PRT# or .atent inringement !laiming P*++)+++ damage"$ PRT#=" legal !oun"el &elie/e" that an una/ora&le out!ome i" .ro&a&le$ A rea"ona&le e"timate o the !ourt=" a,ard to the .lainti< i" P5+)+++$ The 7+: e
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) determine the ollo,ing a" o and or the 2"!al .eriod ended No/em&er '+) *+(*9 7($ Net in!ome a$ P*5')*3+ &$ P*6')*3+
!$ P*'5)*3+ d$ P*'4);3+
7*$ #urrent a""et" a$ P()+67)+++ &$ P()+3()+++
!$ P()+;4)+++ d$ P()+;')+++
7'$ Total a""et" a$ P()767)*++ &$ P()763)3++
!$ P()764)*++ d$ P()74()3++
77$ Total lia&ilitie" a$ P6'')'7+ &$ P;6')'7+
!$ P655)67+ d$ P6+5)67+
75$ Total e>uit% a$ P36')*3+ &$ P3'5)*3+
!$ P3'4);3+ d$ P35')*3+
PROBLEM NO. 10
PRT#) In!$) a non.u&li! enter.ri"e) i" negotiating a loan or ex.an"ion .ur.o"e" and the &an- re>uire" audited 2nan!ial "tatement"$ Beore !lo"ing the a!!ounting re!ord" or the %ear ended De!em&er '() *+(*) PRT#=" !ontroller .re.ared the ollo,ing !om.arati/e 2nan!ial "tatement" or *+(* and *+((9
*+(* A""et" #a"h Trading "e!uritie" A!!ount" re!ei/a&le Allo,$ or dou&tul a!!ount" In/entorie" Pro.ert% and e>ui.ment
PRT#) In!$ Statement" o inan!ial Po"ition De!em&er '() *+(* and *+(( *+(( A !! u m ul at e d
de.re!iation Total a""et" Lia&ilitie" and E>uit% A!!ount" .a%a&le and a!!rued lia&ilitie" E"timated lia&ilit% rom la,"uit Share !a.ital) P(+ .ar
Share .remium Retained earning" Total lia&ilitie" and e>uit%
P P(5+)+++ *;5)+++ ;6)+++ '4*)+++ ;6)++ @'*)+++ + 76;)++ '+;)+++ + *(;)+++ @5+)++ @(*()+++ + P 44()+++ 7*5)++ + '(+)++ + P'7;)+++ @(5+)++ + *3+)+++ P()';5)+ ('+)+++ ++ *57)+++ P 44()++
P 7*+)+++ (++)++ + *3+)++ + ('+)++ + 735)++ + P()';5)+ ++
+
Net "ale" O.erating ex.en"e"9 #o"t o "ale" Selling and admin$ De.re!iation E"t$ lo"" rom la,"uit Pro2t
PRT#) In!$ In!ome Statement" or the Year" Ended De!em&er '() *+(* and *+(( **+(( + ( * P()56+)+ P()*5+)+++ ++ P 34+)+++ '35)+++ P ;55)+++ (6)+++ 765)++ + P()+;')+++ *4)++ P (;;)+++ + (++)++ + P()'34)+ ++ P *(()+++
During the !our"e o the audit) the ollo,ing additional inormation ,a" o&tained9 a $
& $
! $
d $
e $
$
g$
The &a"ed on trading net "ale" "hould &e redu!ed to *: rom ':) euired A" a re"ult o error" in the .h%"i!al !ount) in/entorie" ,ere o/er"tated &% P(*)+++ at De!em&er '() *+(( and on De!em&er &% P(;)5++ at De!em&er '() *+(*$ '() *+(($ The On anuar% () *+(() the !o"t o e>ui.ment .ur!ha"ed or P'+)+++ ,a" "e!uritie" de&ited to re.air" and maintenan!e$ ha/e a air PRT# de.re!iate" e>ui.ment o thi" t%.e &% the "traight1line method o/er /alue o P3;)+++ a 2/e1%ear lie ,ith no re"idual /alue$ at De!em&er On ul% () *+(*) ull% de.re!iated e>ui.ment .ur!ha"ed or P*()+++) ,a" '() *+(*$ "old a" "!ra. or P*)5++$ The onl% entr% PRT# made ,a" to de&it !a"h and !redit .ro.ert% and e>ui.ment or the "!ra. .ro!eed"$ The .ro.ert% In di"!u""ion and e>ui.ment @net had a !urrent !o"t o P*5+)+++ at De!em&er '() ,ith the *+(*$ !om.an% oC!ial") it Ad/erti"ing and .romotion ex.en"e or the %ear ended De!em&er '() *+(( ,a" determine in!lude" the P*5)+++ !o"t o d that the .rinting "ale" !atalog" or a ".e!ial .romotional !am.aign held in anuar% dou&tul *+(*$ a!!ount" ex.en"e PRT# ,a" named a" a deendant in a la,"uit in O!to&er *+(*$ PRT#=" rate !oun"el i" o the o.inion that PRT# ha" a good deen"e) and doe" not anti!i.ate an% im.airment o PRT#=" a""et" or that an% "igni2!ant lia&ilit% ,ill &e in!urred$ Ne/erthele"") PRT#0" management ,i"hed to &e !on"er/ati/e and) thereore) e"ta&li"hed a lo"" !ontingen!% o P(++)+++ at De!em&er '() *+(*$ QUESTIONS: Ba"ed on the a&o/e and the re"ult o %our audit) !om.ute or the ollo,ing9 ($isre%ard income ta&es# 73$ Ad8u"ted retained earning" a" o anuar% () *+(* a$ P*33)+++ !$ P*65)+++ &$ P*4;)+++ d$ P*4()+++ 7;$ Ad8u"ted .ro2t or the %ear ended De!em&er '() *+(* a$ P*6()6++ !$ P*6;)6++ &$ P(6()6++ d$ P'+3)6++ 76$ Ad8u"ted !urrent a""et" a" o De!em&er ' () *+(* a$ P()**3);3+ !$ P()(57)4++ &$ P()(4+)'++ d$ P()*+*)'++ 74$ Ad8u"ted !arr%ing amount o .ro.ert% and e>ui.ment a" o De!em&er '() *+(* a$ P(36)5++ !$ P(;6)+++ &$ P(6+)5++ d$ P(4*)5++ 5+$ Ad8u"ted "hareholder"0 e>uit% a" o De!em&er '() *+(* &$ P45+)6++ a$ P43*)6++
!$ P4;7)6++
d$ P63*)6++
