Homework 1
Problem 1: You were able to gather the following from the December 3, 2016 trial balance of MCL INC. in connection with your audit of the company: Petty Cash Fund Cash on hand Cash in bank – bank – Metrobank current Cash in bank – bank – BDO Acct No.1 Cash in bank – bank – BDO Acct No. 2 Cash in bank – bank – Cocc bank savings Time deposits – deposits – BPI
50,000 1,500,000 4,000,000 3,160,000 (160,000) 4,500,000 2,000,000
The Petty cash fund consisted of the following items as of December 31, 2016: Currency and coins Employee’s valves valves Currency in an enveloped marked “collections for charity” with names attached Unreplenished petty cash vouchers Check drawn by MCL, payable to the petty cashier Unused postage stamps
10,000 8,000 6,000
6,500 20,000 1,500 52,000 Cash on hand represents undeposited collections as of December 31, 2016 and includes the following items: a.
Customer’s check for P160,000 returned by bank on December 26, 2016 due to insufficient fund but subsequently redeposited and cleared by the bank on January 2, 2017.
b. Customer’s check for 80,000 dated January 2, 2017, received on December 29, 2016. c.
A customer check for P90,000 dated June 1, 2008 received on the same date and yet to be deposited since the same has been missing.
d. Postal money orders received from customers, P100,000. Included among the checks drawn by MCL against the Metrobank current account and recor ded in December 2016 re the following: a.
Check written on December 29, 2016 dated January 2, 2017, delivered to payee on December 29, 2016, P160,000.
b. Check written and dated December 29, 2016 and delivered to payee on January 2, 2017, P200,000. The credit balance in the BDO Current Account No. 2 represents checks drawn in excess of the deposit balance. These checks were still outstanding at December 31, 2008. The savings account deposit in Coco bank has been set by the board of directors for acquisition of new computers. This account is expressed to be disbursed in the next 3 months from the balance sheet date.
Homework 1
The time deposit with BPI was purchase d on November 1, 2016 and shall mature on November 1, 2017. Determine the audited balances of the following: 1. Petty cash fund a. 30,000 b. 36,000 2. Petty cash shortage/overage
c.
10,000
d. 24,500
a. 4,000 short 3. Cash on hand
c.
2,000 over
d. 500 over
c.
1,260,000
d. 1,500,000
a. 4,000,000 b. 4,160,000 c. 4,200,000 5. Cash and cash equivalents to be reported in the 2016 Balance sheet
d. 4,360,000
b. 5,500 short
a. 1,070,000 b. 1,170,000 4. Cash in bank - Metrobank current
a.
8,560,000
b. 8,566,000
c.
10,560,000
d. 15,060,000
Problem 2: You were assigned to audit Natasha Inc.'s ac counts receivable which had an unadjusted balance per books of P755,142, net of an allowance for bad debts amounting to P32,858. Your inquiries and investigations revealed the following information: a.
The only entries in the Bad debt e xpense account were:
A credit for P1,296 on December 1, 2014, because a customer remitted in full, an account charged off on October 31, 2014.
A debit on December 31, for the amount of the credit to Allowance for bad debt on the same date. b. The allowance for bad debt accounts had the following details:
Jan. 1, balance P15,250 June. 30, write off of accounts (1,296) Aug. 31. write off of accounts (3,280) Oct. 31, write off of accounts (2,256) Dec. 31, Bad debt expense (3%*788,000) 23,640 Dec. 31, balance P32,858 Records revealed that the December 31, 2014 bad debt expense was debited to the bad debt expense account and credited to allowance for bad debt for the amount shown above, while the write offs credited to accounts receivable amounted only to P6 ,032. Further investigation revealed that the correct amounts to be written off were shown in the analysis above. c.
An aging schedule of the accounts rece ivable as of December 31, 2014, and the decisions are as shown in the table below:
Age
0-1 month 1-3 months
Net Debit Balance
P372,960 307,280
Amount to which the allowance is to be adjusted after adjustments and corrections have been made 1% 2%
Homework 1
3-6 months Over 6 months
88,720 24,000
3% Definitely uncollectible, P4,000; P8,000 is considered to be 50% uncollectible; the remainder is estimated to be 80% collectible.
d. There is a credit balance in one accounts receivable (0 - 1 month) of P8 ,000; it represents an advance on a sales contract; also there is a credit balance in one of the 1 - 3 months accounts receivable of P2,000 for which merchandise will be accepted by the customer. e. The accounts receivable control account is not in agreement with the subsidiary ledger. The differences cannot be located, and the c ompany's accountant decides to adjust the control t o the sum of the subsidiaries after corrections are made. Requirements: 6. What is the correct bad debt expense for the year? a. 10,296 c. 13,343 b. 10,640 d. 14,640 7. What is the adjusting journal entry to record the remaining unlocated difference between the general ledger and the subsidiary ledger afte r consideration of all adjustments? a. Accounts receivable P5,760 Bad debt expense
P5,760
b. Accounts receivable Sales
P5,760
c.
Accounts receivable Sales
P4,960
d. Accounts receivable
P9, 760
Bad debt expense
P5,760 P4,960
P9,760
8. What is the accounts receivable balance on December 31, 2014? a. 793,200 c. 798,960 b. 798,160 d. 808,960 9. What is the required allowance for bad debt expense on December 31, 2014? a. 19,057 c. 29,357 b. 19,857 d. 32,857 10. What is the accounts receivable net of allowance for bad debts? a. 774,143 c. 779,503 b. 779,103 d. 779,903
Problem 3: You are auditing the accounts receivable and the related allowance for bad debts account of S ayote Inc The control account of the aforementioned accounts had the following balances:
Homework 1
Accounts Receivable P1,270,000 Less: Allowance for bad debt (78,000) Net Book Value P1,192,000 Upon your investigation, you found out the following information: a. The company’s normal sales term n/30. b. The allowance for bad debt account had the fo llowing details in the general ledger: Allowance for Bad Debts July 31 Write Off 24,000 Jan 1. Balance Dec. 31 Provision
c.
30,000 72,000
The subsidiary ledger balances of the company’s accounts receivable as of D ecember 31, 2014 contained the following information:
Debit Balances Under one month One to six months Over six months
P540,000 552,000 228,000 P1,320,000
Credit Balances Kamote Co. Kutchay Corp. Kalachuchi Inc.
P12,000 21,000 27,000 P60,000
Additional Information:
The credit balance with Kamote Co. was for an overpayment from the customer. The company delivered additional merchandise to Kamote Co. on January 3, 2015 to cover such overstatement.
The credit balance of Kutchay Corp. was due to a posting error, the amount should have been credited to Kutchara Corp for a 60 day outstanding receivable. The c redit balance from Kalachuchi Inc. was a cash advance for a delivery to be made on January 15, 2015. d. It was estimated that 1 percent of accounts under one month is doubtful of collection w hile 2 percent of accounts one to six months are expected to require an allowance for doubtful of collection. The accounts over six months are analyzed as follows:
Definitely Uncollectible Doubtful (estimated to be 50% collectible) Apparently good, but slow (estimated to be 90% collectible) Total
P72,000 36,000 120,000 P228,000
Required: Based on your audit, answer the following: 11. What is the entry to adjust any unlocated difference between the control account and the subsidiary ledger? a. Sales Accounts receivable b. Accounts receivable Sales c. Sales Accounts receivable
10,000 10,000 10,000 10,000 14,000 14,000
Homework 1
d. No unlocated difference 12. The adjusted accounts receivable balance on December 31, 2014, should be a. 1,212,000 b. 1,227,000
c. 1,239,000 d. 1,260,000
13. The required balance of the allowance for bad debts account on December 31, 2014 , is a. 46,020 b. 46,440
c. 64,020 d 142,020
14. The entry to adjust the allowance for bad debts account is a.
Bad debts expense Allowance for bad debts b. Bad debts expense Allowance for bad debts c. Allowance for bad debts Bad debts expense d. Bad debts expense Allowance for bad debts Problem 4:
46, 020 46,020 52,020 52,020 6,000 6,000 40,020 40,020
PQR Corp. presented to you the following Property, plant and equipment schedule as of December 31 , 2013, in line with your audit of t he same for 2014:
Cost
Land Building Machinery Furniture and Fixtures Audit notes:
Accumulated Depreciation
4,200,000 9,000,000
3,095,100
15,000,000 6,000,000
6,000,000 3,709,091
Useful Life/Depreciation Method 20 years/Double Declining 10 years/Straight Line 10 years/ SYD
a. The assets were acquired at the beginning of 2010 when the company started its operations b. On March 1, 2014 PQR incurred P230, 000 in repairs cost to the various parts of the building. c. On June 30, 2014 an old machinery which originally costs P2,400,000 was exchanged for a machinery of Perchart Company. Perchart Company acquired the said mac hinery at P5,000,000 on July 1, 2009. The fair value of PQR Corp.’s machinery on the exchange date was at P1,250,000. PQR Corp. paid additional cash at P200,000 on the exchange which was deemed to have the necessary commercial substance. d. On March 1, 2014 some furniture and fixtures were sold for P400,000. These furniture were originally acquired at P1,800,000. Replacement furniture were acquired on June 30, 2014 at a total installment price of P2.4M payable in 3 equal installments starting June 30, 2 015. Prevailing market rate of interest on t his date was at 8%. Additional freight and handling costs were paid at P138,322.
Homework 1
Requirements: Determine the correct depreciation expenses on the following: 15. Building a. 590,490 c. 932,000 b. 613,490 d. 900,000 16. Machinery and equipment a. 1,452,500 c. 1,525,000 b. 1,572,500 d. 1,515,000 17. Furniture and fixture a. 685,455 c. 609,091 b. 690,909 d. 824,242 18. What is the gain or loss on the exchange transaction on June 30, 2014? a. 190,000 c. 130,000 b. 250,000 d. 70,000 19. What is the gain or loss on sale of the furniture and fixture in 2014? a. 278,723 c. 287,273 b. 245,454 d. 254,545
Problem 5: You are engaged to perform an audit of the accounts of Kamp Company for its first year of operations ending December 31, 2011. You have observed the taking of the physical inventory of the company on December 28, 2011 . All sales are made on an FOB Shipping Point basis. An excerpt of the company’s trial balance revealed the following information: Accounts Receivable P225,000 Inventory, physical count 127,500 Sales 2,543,000 Purchases 1,125,600 The following lists of sales invoice are entered in the sales books for the months of De cember 2011 and January 2012 respectively. DECEMBER 2011 Selling Price 1. 3,000 2. 7,000 3. 2,000 4. 1,000 5. 14,500 6. 4,000
SI Date December 21 December 28 December 31 December 29 November 7 December 31
Cost 2,000 6,100 800 600 8,200 2,400
7. 10,000
December 30
5,600
Date Shipped December 31, 2011 December 28, 2011 January 3, 2012 December 30, 2011 December 1, 2011 January 3, 2012 December 28, (shipped to consignee); unsold as at December 31, 2011
JANUARY 2012 8. 6,000 December 31 9. 6,300 December 28 10. 8,000 January 3 What are the adjusted balances of the following accounts?
4,000 4,400 5,500
December 30, 2011 January 1, 2012 December 31, 2011
Homework 1
1. Sales
2. Accounts Receivable
3. Inventories
4. Cost of Sales
Problem 6: You have been engaged to audit Ayala Company for the year ended December 31, 2011. The company is engaged in the wholesale business and makes all sales at 30% gross profit based on sales
price. Portions of the client’s sales and purchases accounts for the calendar year 2011 follow: SALES DATE 12/31
REFERENCE Closing Entry
AMOUNT 4,313,000
DATE Balance 12/27 12/28 12/28 12/31 12/31 12/31
REFERENCE Forwarded SI # 706 SI # 708 SI # 709 SI # 710 SI # 711 SI # 712
AMOUNT 4,000,000 60,000 80,000 50,000 40,000 45,000 38,000 P4,313,000
REFERENCE Closing Entry
AMOUNT P3,735,000
P4,313,000
DATE REFERENCE BALANCE FORWARDED 12/28 RR # 903 12/30 RR # 905 12/31 RR # 906 12/31 RR # 907
PURCHASES AMOUNT DATE P3,200,000 12/31 100,000 110,000 150,000 175,000
P3,735,000
P3,735,000
RR is Receiving Report and SI is Sales Invoice You observed the physical inventory count in the warehouse on December 31, 2011, and were satisfied that it was properly taken. Per cut off tests, the last receiving report used was No. 907 and the last s ales invoice with actual shipment of goods was No. 709. The following additional information were gathered: a. b.
Included in the physical inventory were goods purchased and received on r eceiving report No. 904 but the corresponding invoice document was received on January 3, 2012. Cost was P90,000. In the warehouse at December 31, 2011, were goods covered by the sales invoice No 706. Since the customer has already advanced the payment for these goods, these were no longer included in the physical inventory count.
Homework 1
c.
4.
5. 6.
7.
The company uses the railroad facilities of PNR for its purchases or sales shipments. On the evening of December 31, 2011, there were 3 cars still on the Ayala Company Siding: A. Car No.1 was unloaded on January 2, 2012, and received per receiving report No. 905. B. Car No. 2 was loaded and sealed on December 31, 2011 and was switched off the company’s siding on January 2, 2012. These goods were billed per sales invoice No 708. C. Car No. 3 was loaded and sealed on December 31, 2011, and was switched off the company's siding on January 2, 2012. The sales price was P120,000. This order was covered by sales invoice No. 707. The tracks were damaged in Quezon Province on December31, 2011. In the Train cars were goods in transit to a customer in Bicol. The goods were billed on sales invoice No 709 and the terms were FOB destination. In transit to Ayala on December 31, 2011, were goods received per receiving report No. 910. The freight of P1,000 was properly deducted from the purchase price of P31,000. Included in the physical inventory count were unsalable items because they were exposed to rain while they were in transit to Ayala. The invoice cost for the goods which were shipped FOB Seller was P 10,000. In transit to Ayala on December 31, 2011 were goods acknowledged per receiving report no. 915. The freight of P 2,500 was paid by the supplier. The supplier's invoice shows a total price of P 37,500 inclusive of the freight charge.
REQUIRED: 1. Adjusted balances of:
a. Sales b. Purchases
A 4,000,000 3,735,000
B 4,080,000 3,770,000
C 4,120,000 3,825,000
D 4,123,000 3,860,000
