Pre-Week Auditing Problems 2014
Pre-Week Auditing Problems 2014
Pre-Week Auditing Problems 2014
APPW7501
CPA Review
AUDITING PROBLEMS
PROBLEM NO. 1
LAFAYETTE CORPORATION, a ciient, requests that )')U compute the appropriate balance of its
estimated liability for product warranty account for a :;tatcment as of June 30, 2014 .
Lafayette Corporation manufactur es television com!)onents and sells them with a 6-month
On December 31,
2013, Estimated Liability for Product warranty had a balance of P620,000. By June 30, 2014,
this balance had been reduced to P120,400 by detits for estimated net cost of components
returned that had been sold in 2013.
The
2014
bf'les
to be rerned.
However, due to the introduction of new models dur!ng the year, this estimated percentage of
returns was increased to 10% on May 1. It is assumed that no components sold during a given
month are returned in that month. Eaeh component is stamped with a date at time of sale so
the likely pattern of sales returns during the 6-montl1 period of the warranty, starting with the
First
30%
Th ird
20
20
Second
_JO
.!QQ %
Gross sales of components were as follows for the firr.t six months of 2014:
A:>ril
Pt!,200,COO
jvlarch
P3,250,000
2,400,000
May
4,700,000
February
Amount
tjonth
Amount
Month
January
June
.3,900,000
1, 900,0(JQ.
.'
foe corporation's warranty also covers the paymem of freight cost on defective components
the
the components is roughly 70% of the sales p; ce, and the salvage value of returned
components averages 10% of their sales pnce.
::'.l, 2013, werE thus valued in inventory at 1?0/o of th ir original saies pricE:.
Based o n the given info rmatio n, deter ine the foUowing:
J.
Total estimated returns from the sa1es made du:lng the first.6 months of 2014
A.
Pl ,4 8 1 ,500
B.
Pl,651,000
C.
P1,42t,500
A.
P678,250
B.
P648,850
C.
P591,850
2.
3.
t J.
A. 65%
B.
75 %
C.
A.
P301,353
8.
P421,753
P301,353 debit
i1;::bility
C.
Hequired adju.;tment to
6.
P301,353 credit
account
C.
P421,-753
70%
Page l
of sales price)
Pl,553,500
D. 80%
D. P77,847
P120,4GO
-:1ebit
D. P42I,7S: ::redit
000 0000 0 0
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D.
! 1:
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of 14 Pa es
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CPA REVIEW
SCI \OOL
AP-PW"l50.1
OF THE PHILIPPINES(CPAR)
PROBLEM NO. 2
JARAN CO. started operations on September 1, 2010. Jaran's accounts at December 31, 2013,
included the following balances:
p 910,000
482,000
468,000
196,560
810,000
Purchase Date
1
2
October 7, 2010
February 4, 2011
1,857,200
286,140
arc' 2s follows:
I:
Residual Value
Cost
Useful Life
P430,000
5 years
P25,000
P480,000
6 years
P30,000
Additional information:
"
Jaran calculates depreciation to the nearest morn:h and balances the records at month-end.
Recorded amounts are rounded to the nearest pe;o, and the reporting date is December 31.
"
Jaran uses straight-line depreciation for all depi eciable assets except vehicles1 which are
depreciated on the di mi 1ishing balance at 40% p!r annum.
"
The vehicles account b'1lance reflects the total p;1id for two identical delivery vehicles, E:ach
of which cost P234,000.
"
On acquiring the land iind building, Jaran est:m 3ted the building's useful life and residual
.,
2014
03
Bought a new machine tmachine 3) for a .:ash price of P570,000. Freight charges of
P4,420 and installation costs of P17,58C were paid in cash. The useful life and
June
22
Aug.
28
Exchanged machine 1 for office furnK:urE that had a fair value of P125,000 at the
Dec.
31
2015
Recorded depreciation.
Paid for repairs <ind maintenance on the 111achinery at a cash cost of P9,280.
April
30
l"!ay
25 Sold one of the vehicles oought on Noyerr:ber 21; 2012, fdr P6'b:,()00 cash.
June
Dec.
26
Installed a fence: around the property at '.I cash cost of PSS,000. The fence ha!i an
estimated useful life of 10 y.ears and zerc residual value.
Improvements asset
31
account.-)
Recorded depreciation.
. .. ..
; PA
:.
.,
AP-PW7501
f'H
_ ILIPPINES (CPAR)
acconts:
The company's trial balance on December 31, 20r4, includes the following
P 748,320
Cash in bank - Tsum1mi Bank
Cash i n bank - Earthquake Bank (restricted account for plant
'
700,000
30,000
1,000,000
4,000,000
1.
What is the adjusted Ptly casn fund balance on December 3J., 2014?
:. P30,00u
A. P4,347
B. Pl0,250
4.
D. P24,097
D. P4,347
What is the adjusted Cash in bank -Tsunami Bank-balance on December 31, 2014?
D. P429, 110
(. P432,710
A. PS00,010
B. P748,320
The entry to adjust the Cash in bank - Tsunami 9ank account should include a debit to
A. Accounts receivable for P89:800.
B. Accounts receivable: fo r P86,300.
C. Accounts payable for P228,200.
D. Intere!;t expense for Pl,950.
5. The December 31, 2014, statement or finanCliil position should show "Cash and cash
equivalents" at
?4,.l42.. 96G
D. PS,442,960
A. P 6, 142,960
B. PS,139,360
ooo<><><>ooc17
a.a:
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PROBLEM NO. 4
HlATI TEXTILE CORPORATION is in the process of ob.:aining a loan at City Bank. The bank ha's
requested audited financial statements. Hiatt's finan-:'ia! statements have never been audited
before. It has prepared the following comparative 1 inancial statements for the ars ended
December 31, 2014 and 201::.
HIATT TEXTILE CORP<)RATION
C<>MPARATIVE STATEMENTS OF HNANCIAL POSffiON
December 31. 2014 and 2013
2014
Assets
Current assets:
Pl,205,000
1,960,000
(185,000)
l,035,000
. 4,015,000
Noncurrent assets:
Property, plant, and equipment
Accumulated depreciation
TotI noncurrent assets
Total assets
. '
835,000
(608,000)
227,000
P4.242.000
2013
p
800,000
1,480,000
(90,000)
1,010,000
3.200,0()0
847,500
{532,000)
315,500
P3,515.500
I
I
'
\
I
\
\
2016
:1an.
AP-PW75o1
PHILIPPINES (CPAR)
June 20 Traded in the remaining vehicle bought or1 November 21, 2012, for a new vehicle. A
trade-in allowance of P37,oqo was received and P233,000 was paid in cash.
Oct.
Dec.
04 Scrapped the vehicle bought on June 22, 2014, as it had been so badly damagea in
a traffic accident: that it was not worthwhie repairing it.
31 Recorded depreciation.
1. What should be the d<preciation expense for tile vehicles for 2014?
A. P140,976
C. P139,666
B. P138,976
2. What should be the depreciation expense for tr.e machinery for 2014?
I
A. P242,733
C. P239,400
B. P235,000
O. P140,286
D. P266,400
3. What should be the balance of the Accumulated depreciation - Office furniture account at
December 31, 2015?
A. Pl9,933
D. P58,083
C. P19,833
B. Pl8,267
Wht should be the depreciation expense for trie 111acninery for 2016?
A. P277.708
B. P197,400
C. P221,400
4.
oooO GOouo
--------
D. P205,400
0. P403,832
'- --------------------
i?ROBLEM NO. 3
In connection with your audit of the financial statem1nts of ONOR COMPANY for the year ended
; h bank staten,ent on
Your audit of the company's accout. with Tsunar i Bank disclosed the
following:
n:
A check for PS,720 was cleared by the bank as P7,520. The bank made the correction
on January 2, 2015.
A check for P3,500 representing payment cf an employee advance was received and
deposited on December 27, 2014, but was nc . t recorded until January 3, 2015.
Post-da t d
for
arrived inDecmber
Interest earned on the bank balance for th 4th quarter of 2014, amounting to Pl,950
was not recorded.
Page 3 of 14 P: 1ges
..J :
!i
p lllLIPPINES
.. !l1b1ht1es:
AP-PW7501.
fCPAP.)
Equity
.L\ccounts payable
Shareholders' equity:
Ordinary shares, P20
p 607,000
p 980.500
1,300,000
2.335,000
3,635,000
1,300,000
1.235.000
2,535.000
par value;
Retained earnings
Total shareholders' equit/
Tvtal liabilities und shareholders
' equity
:::or
Sales
p1.212.ooo
p3.515.500
Gross income
Operating expenses:
Selling expenses
Administrative expenses
Total operating expenses
N.:t income
P5,000,000
2.150.000
2,850.000
P4,500,000
1,975,000
2.525,000
1,150,000
600.000
1.750,000
1,025,000
525,000
1.550,000
p 975.000
Pl.100.000
2013
On January 5, 2013, Hialt Textile Corporation hac1 charged .a 5-year insurance premium to
expense. The premium t:ltaled P31,000.
a.
b. 1he amount of loss due to bad debts has steadil't decreased over the last 2 years. Hial't
Textile Corporation has decided to reduce the amc un t of bad debt expense from 2% to l 1/2
% of sales, l)eginning wit h 2014. (A charge of 2c;.> has already been made for 2014.)
Hiatt Textile Corporatio11 uss the periodic inv1!ntory system.
1
in,ventory errors for the la st 2 years.
Ending inventory overstated by '75,500
2013
2014 - Ending inventory overstated by P99,cmo
.
c.
d.
equipment costing PlS0,000 was acquired o i January 3, 2013. The purchase was
.
recorded by a charge to operating expense. The equipment has a useful life of 10 yec1rs
and a residual value of P25,000. Hiatt Textile Corporation uses the straight -line method in
depreciating its assets.
.
An
e.
The December
paid is
A.
31, 2014, adjusting entry to" correct the expensing of insurance premium
Prepaid insurance
18,600
6,200
Insurance expense
B. Prepaid insurance
Retained earnings
24,800
18,600
C. Insurance expense
18,600' it:
Retained earnings
D. Insurance expense
18,600
18,600
6,200
Retained earnings
6,200
Page S of 14 Pagfs
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;':
APPWi'.W.
2. The December 31, 2014, adjusting entry to correcr tne expensing of the equipment
purchased on January 3, 2014, should include a credit to
A. Accumulated depreciation-Pl2,SOO.
B. Retained earnings-P137,500.
C. Equipment-P12,500.
D. Depreciation expense-P12,500.
3. The December 31, 2014, adjusting entry to co-rect the inventory errors should include a
debit to
What i$ t 11att':.
i.
.A. Pl,012,200
5.
What is Hiatt's correct2d net income for the year ended December 31, 2014?
correct
Pl,095,200
A.
net income
B.
B.
Pl,212,800
!O<>O()C>C>ooe>---------------- -------------
Pl,121800
----------------------------
Pl,082,800
C.
D. Pl,107,800
PROBLEM NO. 5
The schedule below shows the account balances of EENEFICIO CORPORATION at the beginning
iJnd end of the year ended December 31, 2014:
10,000
Accounts receivable
Prepaid insurance
Equipment
'
300,000
2,500
195,000
195,000
2,000
305,000
8,500
170,000
5,000
10,000
9,000
4,000
CREDIT
1,000
P2.053.000
p876.000
8,000
26,250
39,750
27,500
60,000
70,000
20,000
8,700
LOOO
40,ooa
10,000
35,000
--axes p ayab le
250,000
47,000
capital, P2 par
. \<t.ainedy share
earnings appropriated for
rrdinar
5,000
22,500
55,000
18,000
shares
100,000
291,000
35,000
lncome taxe s
sury
148,000
539,000
50,000
40,000
287,000
Total debits
P222,000
l nventories
rotes payable
Dec.31,2014
DEBITS
11:
9,000
60,000
250,000
53,300
359,400
200,000
5,000
10,000
SCC.PAR!
AP-PWIT!Oi
Sales
'11:
23,000
38,000
34,600
116,000
112,000
5,000
898,000
12,000
000
876.00Q
PZ.053.
rotal credits
Additional information:
a) All purchases and sales were on account.
Equipment with CJn origim! cost of P lS,000 was solj for PZ,000.
b)
25,250
4,000
18,000
'
e) The longterm note pay<1ble requires the paymem of P::?.0,000 per year plus interest until
paid.
lreasury shars were solrl for
f)
thir cost.
.
g) During the year, a 30% stock dividend was declared and issued. At that time, there were
100,000 shares of P2 pc1r ordinary shares outsta 1ding. However, 1,000 of these shares
were held as treasury sh<1res at the time and were prohibited from participating in the stoc
dividend. Market price was PlO per share when th! stock dividend was declared.
activities.
i)
i3enetlcio has determinec: that its purchases and sales of trading securities are operating
Based on
.,
")
.>
4.
:i.
6.
1
i:..
c
lC.
A.
P45,000
2014
B.
PS0, 300
(. P43,500
2014
8. P l l 0,000
A. P l00,000
. ..
201
A.
P26,000
3.
P38,000
3.
P l S,000
.
Cash paid for purchase 1)f equipment
A.. PS0,001)
;:,_
1.
P187,000
P4,000
P83,000
I CJ61,QQQ
. '
D. P l4,000
P42,000
( P182,000
000000000
.
D. P9,000
D. P l00,000
D.
Pl0,000
D. P89,300
D.
P9 3,000
D.
P106,000
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Page; uf 14 P;:ig.:;
.
C.
C:
A.
D. P O
D. P269,400
. P!S0,000
Pl06,000
A: P188,000
D. P44,000
C. P210,000
C. PB,000
A. P?,000
P7,400
' 11:
APPW7!>01
PROBLEM 6
The following information i; based on a first audit of SABILA COMPANY. Thei client has nnt
prepared financial statements for 2012, 2013, or 20 1 4. During these years, no: accounts have
been written off as uncollectible, and the rate of gm;s income on sales has remained const ant
fur each of the three years.
Prior to Ja nuar y 1, 2012, the client used the accrual method of accounting. From January 1,
2012, to December 31, 2014, o nl y cash receipts anc disbursements records were maintained.
.
When sales on account were made, they were entrred in the subsidiary accounts receivable
ledger. No general ledger postings have been made ;ince December 31, 2011.
As a result of your 1xaminat1on, the correct data shovm in the table b ei ow are available:
.
. '
12131/14
12/31/11
p 15,400
1,200
'inventories
2,200
Pl6,600
P33.000
Pll.600
Pl8,800
PlLOOO
P28,200
1,800
800
---
5,000
201:
2013
2014
P148,f.O O
f.00
.!:lfill: OO
Pl61,800
15,000
40 0
P177.200
P208,800
16,800
2,00 0
P227,600
Pl7.f!QQ
P26.000
P31.200
13/00
__
Cash sales
Casll disbursements for
1.
2.
.,
.) .
4.
5.
..
inventory purchased
P!25,(JQO
P141.200
11:
P173,800
A. P658, 200
c.
P74,20G
P625,400
D. P415,300
D. P180,400
B.
D.
P446,000
What is t11e company's gross p ro fit ratiq in each of the three-year period?
C. 35.16%
D. 31.15%
8. 28.35%
A. 33.3 3%
.
of ne three-yea: period?
What is tile company' gross profit for each
A.
B.
c.
D
2012
p 60,933
55,5 J3
122,400
::
---
. 2014
p 80,00 0
79,000
2013
p 68,200
60,133
137,600
---------
178,800
----
g ;
ooo
__------------
-------------
;.!
.....
!'!
t;
APPWOO
Rl
C. P2,122,200
P2,08ft,200
000()()()000
D. Pl,993,200
PRC>BLEMS
1.
BABOLS commenced bu.iness on April 1, 2011, md nas been reporting on a fiscal year
ending March 3 1 .
The company has never been aur:!ited but the annual statements
.
prepared by the bookkeeper reflect the follow.ng income before closing and before
deducting income taxes:
Income
Year Ended
Before Taxes
p 14 ,200
March 31
2012
222,800
2013
207, 160
2014
These
transactions have been recorded as ordinary sa'les and billed as such. On March 31 of eacl1.
year, machines billed and in the hands of consignee! amounted to:
p 13,000
201:'
None
20D
201!
3.
4.
On March 30, 2013, two mc1chines were shipped to a customer on a C.O.D. basis. The sale
was not entered until April 5, 2013, when cash was .received for P12,200.
The machines
were not included in the inventory at March 31, 2013. (Title passed on March 30, 2013.)
All machines are sold subject to a five-year warran :y.
ultimately to be incurred in connection with the warr<1nty will amount to 112 of 1% of sales.
TI1e company has charged an expense account for warranty costs incurred.
Soles per books and warran1 costs were.;
Year Ended
March 3 1
5.
11,180
Sales
2012
P 1,880,00C
2013
2,020,000
2014
3,590,000
WaiTanty Expense
2012
1,520
720
640
2014
2013
p 2,620
3,240
p 3 ,820
p 1,520
Total
3,340
7,700
Ex
2012
2013
2014
p 1,500
1,600
700
2013
1,040
3,6QO
2014
3,400
Total
1,500
2,640
7,700
... ,.
- ---
'
APPWT501
PROBLEM 7
BIRb COMPANY is a manufacturer of small tools. ne following information was obtainetl from
the company's accounting records for the year
er1ded December 31, 2014:
.
.
Inventory at December Jl, 2014 (based on physical count
Pl,870,000 .
1,415,000
9,693,400
1.
The physical count induded tools billed to a custJmer FOB shipping point on December 31,
2014. These tools cost .)64,000 and were billed ::t P78,500. They were in the shipping <:1rea
waiting to be picked up >y the customer.
These goods with invoic cost of P93,000 were sripped on December 29, 2014 .
.:,,.
4.
"
Work in process inventory costing P27,000 was sent to a job contractor for furt:her
processing.
Not induded in the phvsical count were goods returned by customers on December Jl,
2014. These goods costing P49,000 were inspected and returned to inventory on January
7, 2015. Credit memos for P67,800 were issued to the customers at that date.
shipping point on December 26, 20i4. A sales in-1oice for 29,400 was issued on January 3,
2015, when Bird Compa.1y was notified bv the cu:tomer that the tools had been received.
E..
1.
At exactly 5:00 pm on December 31, .2014, gcxds costing P31,200 were rec ived from. a
These were recorded on a receiving r-:port dated January 2, 2015. The relcited
nvoice was recorded on December 31. 2014, but the goods were not included in the
jJhysical co0.mt.
vendor.
t.. A monthly freight bill for P32,000 was received on January 3, 2015. It specifically related to
merchandise bought in December 2014, one-half of which was still in the inventory c;t
December 31, 2014. The freight was not included in either the inventory or in accounts
..
payable at December 31, 2014.
1.
2.
A. P216,200
D. P123,200
A.
..
P9,547,100
B.
P9,576,500
at
Bird's stctement of r.nanCial position
payable of
A. Pl,576,000
B.
Pl,483,000
C. - P9.591,000
D. P9,595,300
report accounts
D. Pl,431,000
. .
. \.
. . ' '"'
6.
2012
p 2,800
2013
1,600
2014
2,240
Based
.L.
D. Pl,873,000
D. P2,045,200
D. P3,590,000
P3,569,200
B.
C.
P3,566,620
P3,578,820
Additional warranty expense for the year ended I' larch 31, 2014.
(. P6,886
A. Pl0,133
B. P24,834
I.
I.
01
Comm!ssionr, on sal
e 5 h ave been entered
v1her'l pri.d. Commissions payable on March 31 of
eac h year W8re:
APPW75
IPPINEStCJ1AR)
'i.
ti.
. .
Manager's
A. P902
A.
A.
f.l
P2,473
Pl,600
B.
Pl,17
P2,240
f'l,i'81
9.
10 .
A.
3.
P229,841
P228,692
(.
D. P6,858
PS,117
D. P17,833
C.
D. P640
P4,640
?2,683
C:.
B. P179,488
P228,692
D. P126,417
P125,785
income before income tax for the year.enjed March 31, 2014.
C. 1=180,390
B. P229,841
P179,4B8
D. P126,417
-- --------------------------oooe:><>C>ooo-----------------------------
.Correct
A.
C.
Pl,149
D. Pl26,417
Pl.25,785
Correct income before income tax for the year enjed March 31, 2013.
A.
PROBLEM 9
'
rt p rodLces 30% of the coun try's milk that is
Gatas owns 450 fa rm s and has a stock cf 21,000 cows and 10,500 hei fe rs. The
farms produce
E: million ki101rams of milK a year, anci the average inventory held is 150,000
kilograms of milk.
1,
2013
Page 11 of 14 Pag1 s
AP-Pw7501
P3,200
4,500;
3,600;
s,ooo;
3,000
4,000
1he company has had probl !ms during the year: Cor taminated milk was sold to customers. As
a result, milk consumption has gone down.
The government has decided to compensa te
farmers for potential loss i1 i revenue from the sale of milk. This fact was P,Ublished in the
national press on Septembi:r 1, 2014. Gatos receiv =d an official letter on October 10, 2014,
stating that PS million wouic be paid to it on January 2, 2015.
The company's bu1ness is .pread cer different part of te countrv e ont: region aectd
by tne contamination was Central V1sayas, where th l;>overnment c rta1led m1 lk producti on in
,
tile region. The ca ltle were unaffected by the comanination and were t1ealthV;. The company
estimates that the future discounted cash flow income from the cattle in the !Central Visayas
r12qiori amountr:d to P4 milli:m, <.lfter taking 'into accoint the govemmnt restrict' ion order. The
company feels that it cannCtt measure the fair value of the cows in the region ! because of .the
problems created by the contamination. There are Ei 000 cows and 2)000 heifers in the region'.
/l,ll these animals had been purchased on Novemb.:r 1, 2013. A rial company had offdred
Catas P3 million for these animals after point:'-of-s<11e :osts and furtheri offered P6 million for!the
farn;s themselves in that region. Gatas has. no intention of selling te farms at present. ;rhe
company has been applying PAS 41 since November : , 2013.
l.
2.
3.
2013? .
A. P93 million
B.
P64 million
:. P63 million
1,
P48 million
D.
in
B.
Pl2.8 million
5.
I region) at November
Visayas
What is the fair value o f the cattle (excluding Crntral Visayas region) at October 31, 2014?
A. Pl06. 5 million
B. P1 13.25 million
C. PlOS.6 million
D. PlOS.75 million
4.
G. P9.2 million
.
i region) due to
Visaya
' = D.
.
P16.7 million
What is the increase in fair value of the cattle (excluding Central Visayas region) due to
physical ch_age ?
.
B. Pl l.8 m1!11on
A. P9.2 m1fhon
- P18.55 m1!11or
o. P9.4 mi l li on
.
[he
.. I
B. P3 million
- - -- - - --------- -------------
000000000
- - ------ - - ------
PROBL EM 10
I
!
---- - - - --
l
!.
--
;.
i
MALOX Speci a l ty Company manufactures three moc els of ger shift components for bicycles
a i e rs ,. and catalog o u tl ets .
Since beginn ing
t iat are sold to oicycle . nanufacturers, ret l
and
costing
ha
absorptio1
normal
assumed
used
a 'first-i n, first
has
Malox
J
1981,
in
operations
of
es
ala
.
the
m
inventory
nc
sys
b
account
The
te
inventory
l
s at bi e
ua
t
oerpe
its
in
w
out cost flo
end of Malox's fiscai year, November 30, 2014, are shown below.
cost before any year-end nd1ustmer.ts .
"
P64 7"000
Finished goocs
Work !n procr:ss
Raw material:;
Factory suppi1es
" .
'\,
'\
11 2,500
2t'4,000
69,000
Page
12 of 14 P; ges
I
I
J;Pi\ REVIF.WSCHOOL
OFTHEp! ilLIPP!NES
(CPAR!
AP
PW75Q1
The fini;hed
1.
NRV
Cost
p 67,000
p 67, )00
89,000
110,000
266,000
94,500
108,000
270.0JO
.
Total down tube shifters
Standard model
s3 .0 M
99,(JO
182.QOO .
90,050
97.550
187.600
Standard moc:el
77,650
119,300
196,950
78,0 )0
117.0)0
19'5.0QO
P6S0.550
PM7.0 2Q
2. One-hall' of the head tube shifter finished goods inventory is held by catalog outlets n
consignment.
3. Three-quarters of the bar end shifter firiishej goods inventory had been pledged as
4.
5.
6.
7.
price 20 percent above the net realizable valu:!. The net realizable value of the rest of
the raw materials is F'l27,400.
The total net realizable value of the work in process inventory
is F'lfJe,700.
Included in the cost of factory supplies are ob:;olete items with historical cost of P4,200.
The net realizable value of the remaining facto y supplies is P65, 900.
Malox applies the lower of cost or net realizabl : value method to each of the three types
Malox applies the lower of cost or net reali::able value method to the total of each
inventory account.
8.
Consider all amount!; presented above to bE= material in relation to Malox's finanr.ial
Based on the preceding information, determin the proper values of the following
. on November 30, 2014.
1.
A.
P647,000
.A.
PlOS,300
B. P643,000
:t.
F> 1 12,soo
<' . . Pt08,700
B.
P227,400
t:. P242,00U
8.
P65,900
Factory supplies
A.
P64,800
P650,550
8.
Pr. P264,000
1 :.
C:.
P61,700
D.
P654,550
D. P104,500
D. P237,400
D. P69,000
AP-PVy7501
5. Which of the followini best describes the PAS requirement for applying the same cot
formula to all inventories?
A. When they are purchased from different suppliers.
B. When they are purchased from the' sam gmgraphic region.
C. When they are similar in nature or use.
D. When they sell for the same price.
-----------------------------
0000000<1 0
-----------------------------
iPROBLEM ll.
You were engaged by COMET COMPANY to audit it financial statements for the first time. In
examining the books, you noted that certain adjustments had been overlooked at the end of
:w13 and 2014. You also discovered that other items had been improperly recorded. These
omissions and other errors r'or each year are summar ized below:
- - - -
------ --
Salaries Pa}'.able
Interest Receivable
--.
" 1 2-J!J1-14
780.LOOO
.
Jrepaid Insurance_____
.
1-dvances from Customers
(Collections from customers had been recorded a.; sales but
should have been recognized as advances from customers
because qoods were not sh!QQ_ed until the followi!J.earJ.
.9_l
_ Machinery
12-31-13
_:_ 0
873 66
21000
259,20{)
561_000
.L400'
470
384,000
307,800
522 000
561i_OOJ
Required:
-- . What is the total effect of the errors on the 2013 1et income?
A. Understated by Pl,236,600
C. Oven ;tated by P80,400
B. Understated by p77;,soo
D. Over:;tated by P165,000
;. What is the total effect of the errors on the 2014 i1at. irrcome?
A. Understated by P32Cl,100
C. Over:;tated by P324,300
D. Over!;tate!l by P380,700
B. Understated by P37G,500
::. What is the total effect of the errors on the comp<1ny's working capital at Dec. 31, 2014?
A. Understated by P265,800
B. Understated by P301,80 0
c..
C. Over:tated by P820,200
D. Over!;tated by P l 1 9,400
What is the total effect of the errors on the palanc of the company's retained earn ngs at
Dec. 31, 2 0 14?
C. Unde:stated by P155,100
A. Overstated by P855, 900
D. Understated by P265,800
13. Overstated by P930,JOO
r:
. t: j
i
--- END -- .
:i
:I j.
t.1 a n 1 I ;,:
AU DIT IN G PR OB LE l\ll S
PRO BLE M NO. 1
, ------
Computatic
CPA Review
-- -
Parcentagt::
Month
at
March
April
May
June
.
. . . .. . . . . .
.
__
. . .
.... .
1 4;__
2:.
Junu:...3:.
.: 0:.!..
..: ' .::.
0.:...
__,.
=:
=:
::: ::
"':".':"
::
".'
:'.'.:".
_
_
--
Percentage of
f.P..
Estimaj
Returns Sub-
l .Jtal
sequent to
Es ti nated
:turns
?% l P2 4 00 0
7
Returns
P4.200,000
4,700,C:OO
3,900, 100
3,250,000
2,400,COO
1 ,900,CIOO
rebrua!:Y_
Estimated ,
Sale;
.janua!"_Y
..
I ..
I
Total
Estimated
Returns S1.1bsequent to
6/30/1 4
6/30/1 4
P29
1 0%
- ----- -
400
---r---!
-"-----
7
7
10
10
l
I
I
! EJ
P648,850
65%'
Rg_uired lia
_ !lili
. !Y balance . . . . . . .
Le ;s balance, 6/30/1 4 . . . . . . . . . . . .
1 20 400
..
R
uired ad
justment to
11abiliaccount
.
.
en -- - -----
_ __
-----------
_ ___ _
Warranty Expense
2.
i='ROBLEM NO . 2
l.
.
-
------- ----r-----+--il
..
'
Adjusting E11try
70%
5
75%
10
%
------
3.
8
.
4.
5.
JARAN CORPORATION
June
22 acquisition
Total (A)
Pl40.97E.
'otal (C)
2
3
Machinery:
P239.400
P:.09,600/8
x 1
4/12) (B)
P18.267
. t
AP-PW7501SQb
2:
(P480,000 +P120,000)
ND, Feb. 2009 - Dec. 31, 2015:
Machine
P600,000
Cost
Carrying value,
368.750
231,250
(50,000)
1/1/16
25months
Machine 3
Total (B)
197.400
P90,360
197,00
Buildings
Machinery
Vehicles:
.Old, traded in on June
Acquired June 22,
20, 20l6:
2.
3.
13,700
5,SOQ
P109,600/8)
P394.060
(A)
PROBLEl\!I NO.
1.
ONOR COMPANY
2014
Pl0.250
Bank
P638,340
Book
NSF check
Unadjusted balancEs
P748,320
Bank error
'
1:4
4.
(276.380)
P432,710
Adjusted balances
P432.710
89,800
230,000
1,260
A Accounts receivable
Acco unts payable
Bank service charges
k
Ca:;h in ban k - :-sun ami Ban
Advances to em ployees
315,610
3,500
1,950
Interest income
5.
p 432,710
i Ban k
Cash in ba nk - Tsu nam
Petty cas h fund
nme aeposit
.,
\.
.'It
,}
Page 2 of 8
-
Pagt s
10,tso
1,000,000
4.000,000
PS.442.960
_
_
_
_
_
_
__ _
_
_
_
_
....,
P
P_._
A,,_
.J:.;
1
50
u...=
W7
L
_
.0
f
:--
r- -
Retaj!)ed -arni!JP
24,800
'
i
'
2.000
--
25,000
'
.
-
'
Retained earnings
t---
'
Depreciation expens1
7 5, 500
23,500
I
'
99, 000
3. c
1 2, 500
137,500
25,000
201 3
2014
/.!.
_.._:
Retained earning:;
Accumulated depreciation - Equ ipmer.t
1 50, 000
___g_u!Q_ment
E
r---
i.
'
Ir--l
i
I
--
-r-::2_
r=
1 8,60 0
6,200
'.
P975,001
P 1 , 1 00,000
1
I
I
-j
..
__
'
___ _ _ _ _ _
.
.
5. c
4. D
P1
J
----1
.oai.f!OQ
P1,Q:l16QQ
___J
Sales
P 898,000
ri_
u_
.c
_s
tie
Gain on sale of trading S:>_
1 2,000
_
__;
Cost of__oods
_g_
sold
i._5 39,00
e
e_
e_
n_
d_,
n_
s_
xp
a
ra
e_
s_
,0
8
2
ll_
_
i n
0
_'_
l_e_
_
g
S
i-- _
g
_
en
_
_
7
_
_
_
_
_ __
_
_
_
_
_
_
-+-1
0
)--
I ncome taxes
i._35,0001
Unrea lized lss on trading securities
4:--'-,0
_,_
j
-:-0'-0
..!. -..:'
:.)_
--t
r-
,
1 t_
r-- Loss on sale of equipme:__
------- - J1 0001
_
_
_
_
_
_
-+ .. -:
=p
44
"-o
Net income
o
o
,
,.,
1
...L. ;,,,
--- '
______
_
___ .___ _
__ ___
_
_
_
-- .
-- -- ---- --
- ---- --
Answer: D
_ f-l!2Piate9._ retaJ!]_
j_____Y!:l
earning Dec:...]_.
2Q 1-
rJet income_
e
o .-:n_
se
(_
1 >:-- -'_
__
--= I
L_oecrease in appropriation for treasury stock
-
Increase in a ro riation for ossible bui!din 8XD.msion
___Stock_ividend declared
--+-.
Answer: A
pa1ddurmg
Page
of 8 Pa ) S
.
.
-,
P 1 12.eoo---1
44,000
5,000 -- - -I
'.
J1 s .0001
l59 40Q)
86,600
78,600
_I
_J;
1
E].QQQ._ !
I ncrease in ordinshares
Less: Stock dividend
t-
Proceeds
from
AP-PW7501 .SOL
;014
I
!
201 4
P1 59,400 1
59 400
P100.0QO
P1 1 1 ,000
1 000
EitQ.ooo
.1:.2.10])00
r--
Answer: C
. ....
_ _
Answer:
i.
___
P 1.000-i.
1 000
8,000 .
1 5 000
p 7.QQQ
Ei.
___
P1 35,000
. 1 5 000
1 so.ooo
Cash paid
'---
.,
(SQUEEZE)
Bal.
7.
ment
170,00U
Egur
1 50,00Q
1 2/3 1/'14 305 0012
1 5,000
Sa:e
'
8.
50 000
16C)]QO
Answer: D
"Na.ooo
c
eeds tromaie-ofeguTpmeri t (see informatio i: "b'1
: Loss on sale of egu iement
-- --- - -
30,000
4 000
26,000
1 2 000
P5,000
1 000
P6'.ooo .
Answer: A
Net income
Depreci ation
' .
I
i
i
Ii
(12,000)
38,000''
(6,300}
___,
(45,000)
!'
P 44,000
29,000
!
i
.
i. I;
:\ \'
;!
[ . _
/
i-
i-
APPW7501SOL
ICPAK)
9 , 00 (1
Decrease in inventor
ies
lr.c r1 prepa i d insura nce
Decrease tn accounts
paya ble
Inc rea se _m acc rue d ex
pens es payable
Increase in income taxs
a able
Decrease m unearned rev
enue
Net cas h rovided b o )era
ting activities
]so0:
{5,000i
9, 30(1
25,00CJ .
]8 000)
p"ffa 000
_ _
Answur: C
:; _
- -- ---=-:---;---::-::-=:;:-:-:
-no. 6)
Purch
ase of equipment (see
Overha
ul of equipment tsee information " h")
.
! Sale of equipment (see information "b")
I__ _ Net cash used in investing activities
Answer: B
P 8,000
i-:- --Payment of cash dividerids (see no. 2)
.
(20, 000)
Retirement of notes payable (P6 0,000 - P40,000 1
, 000
Sale of treasury shares (see no. 7)
6
--------+--'77
0---1
0
1
0
2
Issuance of ordinary shares (see no. 3)
..!..-----+--=-=-
-=
0
_J
P 1 8 000---i
L .-t cash provided by financing activities
__
_
_
Answer: A
. l,ROBLEM NO . 6
L_
: .
[
_
____
-4-
_
_
_
_
_
_
_
_
....;.
...;
.;; =-..
;.;;
_JL:=::=:_
_
_
_
_
_
__
_
_
_
_
ev
enue for 20 1 3 (see no. 5)
-"?
a
_
le
s_r-
_ _
:i.
Total
L ess :__
ccc
ei_
nvable, Jan. TI01'2"" ---.
ts
_
_
re_
Aou
Total credit sales
---Add: Cash sales, 2012 - 2014
Total sales, 20 1 2 - 2 0_
1_
4
,
___
_
Answer: A
_
Answer: A
__
<L
Answer: D
1_
-)ales (see no . _
)
---------------- --.
------+--=-=-:..!.=.=-= ...J
___.i.._...__........
., ___J
._ _
_
_
_ _
_
_
_
_
Answer: A
Page 5 of 8 P<a;:es
__.
_
_
_
_
-1
i-L_
lf'i\
-,) .
AP-PW75010L
Cash sales
--
Collections in:
201 2
201 3
2014
- ----AJR,
Dec. 31
-
---
17 , 000
2013
p 31 ,200
-
800
1 83,600
33 1/3%
28 200
268,200
33 1 /3%
1 800
206,400
33 1Q.%
p 89,400
p 68,800
p61 200
2014
p 26,000
Answer:
2012
r-
_Unadjusted bslanc es
lnventor.y
P1 ,870 , 000
.
.l\djustments:
f--
1.
2.
3.
..
4.
--
5.
6.
7.
---
!_
.
-
..
P1 .76,QOO
Q.2QO
P2,086 , 200
1 870 000
p 2l.2QQ
01''P1 576,000
1 4 1 5 000
11,QQQ
5. B
4. A
1.
2.
-- -nsignments:
Billed at 130% of cost
I-
i]130/
--
--
10.000
3 000
Profit error
COD sale
Corrected sales
I
i
2013
-----+- 13,000
Cos
3.
P9,576,5QO
Answer: A
Answer:
P9,693,400
l nventoer audit
lnventoper count
Net adjustment - in crec:se
----
.___
P2
-- --
148,800
176,800
227,600
30 800
658,200
33 1/3%
P21fil 4QQ
8.
p 74,200
Net Sales
P1 ,41 5,000
'
"
Total
Accounts
Payable
.'
'
2012
P143,200
2013
P222,800
580
1 3 ,000
2.o.zo.000
12,200
, 3,5so,ooo
. I11.1 aQl.
2 20Ql
ToO 3:566&Z..o
04s
Page 6 of 8 Pa,es
2014
P207,160
1 1 , 1 80
2
3.000
1 867 ooo.I 2
;
SUMMARY INCREASES
{DECREASES} IN INCOME
8 600
1 ,880,000 I
11 3'006)
I
I
2014
---
I
\
I
.\
\
\
I
THE P l l JLIPPINES
{J;,_,
PA
....
._ l
H
,,._
--- --- -
1
]112 of 1
Costs charged to e
en
-
t---
5.
6.
t---
Addition al expen se
Bad debt adstments:
se
Y. of 1 % of sales
Previous write-offs
Additional e_ e
p nses
Adiustment fN commis.'>
9,3 35.
T
0\ l
_l334QJ
7 e_I5
6 886
Q)
ions
-
1 % of income before
(2,640)
_.1iU
1. A
2. D
3. B
4. A
PRO BLE M NO . 9 - GA
TA S, I N C .
1. C
5,1 1 3
--
_ _ ___
.
.
- ,,
Tiit
J:
7. A
......
tI
6. D
8,917 I
(7}00)
----
5. A
J
1 0 1 .13 .T
{Z/00)
l
l
1 7,833
'
-----
'10,226
11 52
4,668
50
L1
AP-PW7501 SOL
_
_
_
t exeense .
--- --ormal warrany
126,417
29,841
P12 .785
P 2 8.692
1- l"'I I
8.
1,1 4 9)
9. A
Cows ( 15,000
x P4,000)
( 1,000 x P3, 000)
Fair value, Nov. 1, :013
'
3.
Cows ( 15,000
x PS, JOO)
(1,000 x P4, 500)
Heifer; (7,500 x P3,600)
Fair value, Oct. 3 1 , 2014
.5,000 x P( 4, :iOO-l,000)
1,000 x P{3,200-3,000)
Heifers 7,500 x P(3,200-3,000)
5. A
1 0. A
P7,500,000
200,000
1.500,000
P9.200.000
P7,00,000
1,300,000
3.000.000
Pll.800,000
7,500 x P(3,600-3,200)
P30,000,000
9,000,000
P39.000.000
Total
FG
Down tube shifters at NRV
Bar end shifters at cost
H.::ad tube shifters at cost
)NIP
P266,0:JO
1. B
FS
.P10 8,7 00
Pll 0,0 001
127,400
P643.0QO
2. c
RM
182,000
195,000 .
i9021 J
P17S488 ,
Total
.
18C,390 I
p 75,000,000
4,500,000
27.000,000
Pl06.500.000
Heifer;
Heifers
4.
P60,000,000
3,000.000 .
P63.000.000
Heifer;
2.
!
_J
3. D
P108,700
4. A
P237.400
5. c
P64,8002
P64,800
11
PROBLEM NO
AP-PW7501-SOL
COMFT
- C O M PANY
2013
NI
f--
___,-
------
-- ,
._if
--!
-----
-- ;
--- .
'
1-.....j_..
..
! 2013
1 201 4
3
1 201
2014
2013
4. c
3. c
! 201.6.
j
2. A
--
- charged to repairs
Capital Expenditures
--
12-31-14
RE
2013 I
! 20 1 4
--
1 2-31-1 4
WC
I
2013
' 2014
Failure to rcco
_g_nize sala riesyable
r]Under)
2014
NI
Ove
165,000 (320,100)
80,200
J1 55 ,1Q O) I
1--
--
----
t4
5
Re!ained E a n in-9_?
S ala ries Expe nse
S alar i es P ai'.c.ble
r
.
.
Interest Receivabhi
Interest Income
R_!jn ed -C!':'.1it:!.9S
.307,800
76,200
90,600
470,400
Retained Earnings
Advances fro n customers
- -----
De
_greciation Eense
Accumu lated Deereciation
Retai ned Earni ngs
'
384,000
Sales
Repairs Exernse
.600
780,000J
259,2CO
lnsurance_xpense
Retained Earnings
Mach 1 n err
2 1 3,000
46,200
__
. .---------------
873,600
j
I
--- EN D
.'
086,000
. 500
561 , 000 1
522,00
1 1 0,700
535,800
AP-PW7 502-S OL
J\U DITIN G PR OB LE M S
PROBLEM NO. 1
fBala
CP A Re vie w
MSU, INC.
_
_
_
_
_
_
_
ingrent(h&k--
---
Error i n recorci
--- - _--=--------r------
----.. -
! NSF
check
I Balancer boo ks
-- ---- ------- -
P--l
_
_
_ __
_
_
_
_
\_Unastedj>a la!J_
! Deposits
___________--!l_.:Bo
o k--+-=:
--j
lr-
_
_
in tran si t
!_outstanding checks
! -r!-) rec:[email protected] c neck
_____
I Au
_i:natic ortg1m e n t
Bank service charges
l?
l eposi crr:Qited to comany's account
I NSF check
-------l
s
. ..lcifu- tecfba nces--= ---
-- -
L-j
-----1---!.J...
.J.
j
I
- --- --- __
PROBLEM NO. 2
--,--
--- _______
'
-
__ __ __
.. -- - ___
_
_ ___ __
--
---,
- r-
__.
.-----+----------------'------
PITO-P!TO COMPANY .
R<itio
'\gin.9_
Ctegorv
- --
--=
-'
-- --:--
,_
_
_
Acco u nt
Receivable
Balances
---;-
__
_
- -----t-- ---;1_
------- -
Chking_9_four:it baj_an1
---
l
i
....'... ----t--------"1
__
__
_ _ _ _ _ _ _ _" _ _
___
\_Pe!!Y_ cash
I Trea s ury bills
rTotal cash and cash eq 1valents
'.J
;-
10 day
. 11 to 30 days
I Past due 31 to 60 days
- - '-<?.':.----- --- .. -
--
I
.___
_:_ ____
64/o T
1sc:.10
8%
510
3% i
--------:-
r-
12.LOOC1
3000
35%
31L50
48
80% - - - ---
_:_]I
5%
20%
--
-'
Amou nt
Rate
240.LOOO
150.LOOO
901000
60,0QQ --
2 L .
.!.____ ___ _ 4
PJ0.000
.
Uncollectible
ooc.
--
aa: e
....
-.-,
-+-----
=:]
_J
.
.
"Page l of 6 Par,
--
___ J
s
!'!\ RF.VIEW
AP
f3TAceounts receivable
IL
-----=---
-----;---
-------ir--
'
I.Alternative computatiGn
_j
I
- -
::J
P640,00C:J
-- ---- -----------+-----'- I
. 1.
I
---,
!
.I
_____
P3,000,000
'I
. '
PW7502WL
CJ
54,60
J..58000
+-"'
::....: ). I
- =..t...:
1
f.154:200 i
- GARLA
---.----
HOME IMPROVEMENT!>
!
I
Cost
i t' R.e31izable V al ue
Lo wer
'
.
=:.__-=
+--=-=, ._
,,
68
; :.:;;
P=..;..:.;:;
.-- ---- sid ing _--:_
Al
o
umi -num
I:
_ 1
00
p 168,000
.
Ccdar !;hake siding_,____
254 400
258 ooo . l
254
4
00 ..
::.:::.
.:.L..;.
-==--l
.:: _
.;L... c::.
.:.
9
:...
O
-':::.:04
,. - 'v 0
-: :--:
36'."-'.
3:::-:
-tL-J uvered glass doors
5
0 0
- Therm al windows_____
420 000
4
20
00
0 +- -
_ _________. ____ _
. . . .
...,.
..
-
__
------...-
_
_
:+
)4
non
L-J
i _,P
t;J
>1,...i
.3:;i,
4'
rmi
-_J_
----L
___i;
E.
.JM
l
- - - - - --
__
_
__
_
_
_
_ __
::=J .
'----'
------ ---- -
MANGO BANGGO
/-_)__
PB2,500
j.
-....L-;
;...;
;
:=.,;:
;;.L..
c.;,_
_
_
_
_
_
_
_
_
_
..1._
I
I
! I
---L-
-
l u
e
--=-::
-' va
8_:_ i I Agriculcural p oduce, <it-'---fair
Gai n from cha n e i n f;iir value biologiGJI asset
--------+-----J
-Gain from chan e in fair value - agricultural produc :-+
!._ .
- - - --
s..
e.::
_Gross fO_!! on sold rmngo
:..=
_Ji?_tft_q !r:i_cr:i:i
___
PROBLEM N O . 4
1.-= i
_
_
_
_
_
_
_
__
:__
_:
:_
-------+------_J
.
.
'
Depriation expensE_;.:.fo::.:.r..:2::.:01.::.1=-:------
s:.J'.
.C 0
:'.
..:: 0!1.:.
--- -- Truck # 1 (F:_
,o
1
so
----
------+-- -"'
-l----._:
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
:--- ------+---J
--:0
-:00
5L
/-
,
0
22
=
Truck #
S
L------- -----l--!.._-J
2)
V:
x..!.
Truck # 3 P300 OOOl.
Truck # 4 P240 0001'5
2.
L1lated depreci.tion,
Lo
s_
s_
on trade -i n
=:...
L..=.:
rj
I'
P300 000
=--------------i__
i
I;
l1
1h)
{m
__
_
_
__,
_._
_
_
_
APPW7502SOL
P220 000
J:r uck # 5
truck #6
___ --Accumulated depreciation:
===-
---1-
Truck # 1
20 1 2
2011
Truck #2
Truck # 3
Truck #
4
---Truck # 5
--
44 000
225
210 000
OtlO
_ _____
_
---
-!-
Total
2014
..
.!------....:_:_-+----r--__J .
.
.!.__ __:----+---1'
_
250 500
-----.---,--
MADRIGAL CORPORATION
s price
\ --- \ .B_i:_o_!5e 1 fE'.-=
in value P36; 670
_
__
__
\?
\' -:_
.
---Jens-e:::::==========::===:===--J
f- i-:--
--
_ _-__ -_
d_epreci a tio
_
mu
cc
A
n
te_
d
la
u-
PROBLEM NO. 5
!\
20 1 3
'
--
Truck #6
- 48i_Q_0_.9_ j___ _
30 000 I
Correc-9.!iation
Per client
Overstatement
-+----r-'
;-
-j
---+-- -- ------ -!
Truck #2
-I
00
4_
...LQQQ_.-+.---- - --1
_
_
--+.Pl,_Q40,0
_QQ__j
4 20 00
_
__
Gain
on
--+-
---
180/360
:- sale of Sinker
-----'-----1
-
I
3
r
I
__
----
--
_
_
--
--
--
Floater
Sin ker
Leader
--- -- ---Jan. 1
April
Jan. 1
April 1
D_ : _
3_
1
Jul
Nov. 1 - Dtc.
Total interest mcom1
_
_
_
_
_
31
--------
5.
I- -
.'"
-1- - --
Floater
Leader
Accrued interest receivable Dec. 31
Carinc Value
2Q 14
. .
Fair Value
I Jl
---i
1 -
..
AP-PW7502-SOL
r-1. 1
Polify_1
Insurance expense
Policy 2
PoliQt 3
r red d n 2
014
-
t_ i____
u_
g -_
_
_
_
_
r:
_
ota_
I depreciation expense
1:
_
_
_
_
_
_
__
! 3.
1
..
4.
Interest income
Rental income
PRBLEM NO.
AJEs.DECEMBER
,201
3-'1-----.;.c_
4 ----- ---- - -----+- -..f1
Machinery
Pat1ts'---
!..
..
---- -.,---,-----&..-.--------+--+---l
___
-
. --------
- ---Retained earningtl!!TIY.a
::.
.: t.:..:..:: lo
):
.:: sL
rm
.s
:.:
::.i.:.
.: .:.
.:. ::.
.:.
e.:. n
eQ.L9. ag ree m e .:..:.
ic
L_
_
1 t..::
l:.__
3.
_
_
--------
_
_
_
_
_
_
_
_
_
_
Recoverable v<1lue
-----Impair.:..:.rne.:..:.ntl=o;s'---------+---}--
_ __ _
Leasehold improvements
-;::s (;:;
_
_
_
---
6.
1.
2.
3.
4.
5.
old
Retained earnin s
_
_
nen ts
Accumu lated depreciation - Leasehold improve1_
Retained earni n s
Organ ization costs
Patents
Licensing agreement 1
Licen sing ag_reement 2
Leasehold improvements
Retained earnin_g_s debit
-
-+-----1-
_
_
_
_
_
_
.
.
Page 4 of 6 P; 1 ges
'
--
JMSCH OOL
pROBLEM
NO . 8
\)I' T H E
'
BE NS ON CO RPORA
TION
'
! s. I
4. I
Ilem
Shares Issued
Beginning Balance-1/1/14
40ct_OOO
:5
Jan. 16
Balance
-t
Feb. 10
B alan ce
P2,0)0,000
Earning_
Premium
i
Retained
Share
Par Value
T
i:
Balance
P3,_000
P850.LOOO
000
--
'
March 1.
April
AP PW7602SQl
Balance
Balance
1
J
.l:!!Y
alanc:e
t=
g.
l
.J?_lanc__1]131/ 14
--
'
.i-- -
3.
_,_
_j
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
P_ l,309,SOQ.:_
Pa ments
sPu rchase
=
-----+
-+
-4
_y_ouchers_Q 9vableJ.!l_e!L _
---+. ----Purcase re u r s
Pu rchase discounts lo.t on paid voucher:;
.
t n
'
_
-
EC Purchase
discounts lest
I
--.-bl
-=-=:.:..=
v
e.:....:....
==
1-'-
o
uchers a a
I.-----...j._----=-:J
.
PROBLEM NO. 1 0 - MUNTINLUPA COMPA NY
_Ll. .
Collections
Total
Accoun ceivabl Ma
31
_
_
rch
_
Sales, April 1-April 21
-'---
_
_
_
_
-----+--
Sales,_Jan. 1-March 31
.L_.
_
_
__
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
Page S
of 6 Pag<"s
_J
_
_
_
_
. .
I 2.J
c e s
Purchases, Jan. 1-April 1.1
sales
3] Net
Cost of sales
Invent Jan. 1
available
Inventory, Dec. 31
r-_
L
- ---
ross pro!!L_
'
I
I
660 000
5 150 000
5 81<t_OOO
1750 ooQ)
_.
'
for sal e
ost of
t
rossYf.9f.!.U.9Q___
I v
Unrecorded purchases
Net purchase s
Goods
APPW7502SOL
-- -
P9.L20Qi..OOO
I
!
Is 060 ooo}
P4,140.000.
-.-l
' -
Ne t purcl -+
-j
-- -- -- -_a
si .L
__
Co_
st_
o_
f_
21------
ril-=
"'-'-"
___ __
__
---'o-'-'
-'-'-'
-----+-
I:
,. i
_!:ess: l
s"' _
s"'-___ _ Jnvento
_!}1_f_
e_:
i r_
lo
'"
_
_
_
_
_
__
_
_
_
/IJ
Carrying
f=I/
value of
.__
:;J;:nf:=,tpayments
L_ ----st of
------
1---
'--
_
_ _ __
..
___
:..i____________
ery
machi:.:..:11.=
__.
.
[i_-:=J}i1_terest expense 20 ::..:J.3---for
--'
J
__J.. ...J
j
-+
_
_
_
_
_
'--- -
_
_
_
..1..
__
__
__
_
_
_
_
_
_
_
_
_
_
__
_
_
_
_
____
. ______J
-- E N D --
'
1 : 4
AU DI TI NG PRO BL EM.S
a n 1 I .:1
PPI NE S
AP-PW7502
CPA Rev i tW
PROBLEM NO. 1
--h:.
a)
c)
One check written in payment of rent fol' P2l,600 was correctly recorded by the bank
but was recorded by MSU as P26,400' disbursement.
d) In
accordance with prior authorization, the ,Jank withdrew P45,000 directly from the
checking account as payment on a mortgage note payable. The interest portion of that
payment was P35,000. MSU has made nQ ent;y to record the automatic payment.
e)
A depo;it of P87 ,500 was recorded by the bci lk on December 13, but it did not belong
f)
l)
to MSU. The deposit should have been made :o the checking account of SUM, Inc.
The ba n k statement included a charge of Pt:,500 for an NSF check.
returned with .the hank statement and th;:
customc!r.
h)' MSU mciintains a PW,000 petty cash fun tha : was appropriately reim bursed at the end
of December.
i)
According to instruction for MSU on Decembe- 30, the bank withd rew Pl,000,000 from
2.
J.
A.
Pl,3 04, 7 87
B.
Pl,301,187
D.
Pl,264,287
D . Pl,211,187
What amount of cash and cash equivalents shou'd be reported i n the current asset section
A. Pl,821 , 187
4.
B.
P2,321,187
t :.
Pl,301, 187
D.
Pl,874,287
If the balance shown en an entity's bank statement is less than the correct cash ba larce
and neithu the entity rror th bank nas made an / errors, there must be
.A .
B.
Deposits credited by the bank but not yet recr'ded by the entity.
:i .
If the cash balance shewn o n a n entity' accounting records is less than the correct cash
balance and ne1cher the entity nor the (Jank has : 1ade any errors, there must be
A.
Deposits credited by the bank but noi: yet tec)rded by the entity.
Deposits in transit.
C Outstanding checks.
B.
000()()()000
P,1ge l
01
-----------------------------
1 ?. Pagt s
j.
APPW7502
COMPANY prod:.Jces herbal tea and other slimming products that are sold
throughout the Philippines. 'Nhile the company is experiencing a steady growth ;in sales, it has
become noticeable that collections of accCunts receiva ble from customers are no: longer as fc1st
as they used to be.
PITO-PITO
Pita-Pita Company's product!; are sold on payment ter:ns of 2/10, n/30. In. the past, more than
75% of the credit customers have availed of the disccunt by paying within the discount period.
During the year ended Dec.ember 31, 2014, there las been an increase in the number of
customers taking the full 30 days to pay. The com any estimates that less than 60% of the
customers are taking advaritage of the discount. B:id debt losses as a percentage of gross
credit sales have increased from the 1.% provided n prior years to about 4% in the current
y.:?ar.
The deterioration of accounts receivable collections has prompted the company's t:antroller to
prepare the following report .
It is normal that some eceivables will prove un1 :ollectible. In fact, annual bad debt writeoffs had b ee n 1 . 5% of :otal credit sales for man'1 year;. However, this rate has increased
'
The condition Qf
this balance in terms of age and probability of col1ection is oresented below.
Proportion
of Total
64%
18%
8%
;%
::%
;%
Probability
Age Categories
of Collection
1 to 10 days
99%
1 1 to 30 days
97.5%
Past due 31 to 60 days
95%
Past due 61 to 120 days
80%
Fast due 1 2 1 to 180 days
65%
Fast due over 180 days
20%
c. TI1e allowance for bad debts had a credit balano! of P54,600 on January 1, 2014.
D . The P640.. 000 bad debr expense provided durin the vear is based on the assumption that
4% of total credit sale$ will be uncollectible.
2.
mber 3 1 , 2014?
What is the required allowance bqlance on Dei:e
C.
P209,200
B. P 1 09,6 00
A. P154 ,200
D. P55,000
10,400
A.
'\
\;
',
Allowance
.
D. Bad debt expense
ul accounts
Allowa nce for doubtf
10,400
10,400
10,400
44,600
154,200
44,
600
154,200
((P,\Rl
ompany
Dec
's
at
receivab
accounts
le
31, 2014?
3.
APPW7502
A.
:l.
P2 ,95 5,4 00
ito
sho uld
., ,600
5: Pito-Pito's tota l
A.
B.
C.
P2, 736,200
C. P640,000
P595,4 0 0
Pl6,000,000
-----
P2,845,800
B.
()()0()()()1)()()
P42,666,66 7
C.
-- - - - - - - - - - - - - - - - - - - - - - -
P25,600,000
- - - - - - -- --- --------
D. Pl,6)5,800
D. P684,60C
D.
P14,625 ,009
----- -- ---
PROBLEM NO. 3
Presented below are two
situatiol) .
independent
situations.
GARLA HOME IMPROVEMENTS installs replacement siding, windows, and louvered gla s .doors
for single family homes c.nd condominium comple.<es in Quezon City. The company is 111 the
process of preparing its annual financial statemen for the fiscal year ended May 31, 2014, and
Jimmy Lansang, controller for GARLA, has gatherea the following data concerning inventory.
At May 31, 2014, the balcince in GARLA's Raw Mat?rial Inventory account was Pl, 224,000, and
Lansa ng
the Allowance to Reduc: Inventory to NRV ha J a cred it balance of P82,500.
schedule
summarized the relevant inventory cost and rnamet daea at Ma'!" 31:1!014, in the
below.
Net Realizable Value
Sales Price
Cost
p 168,000
' 192,000
p 210,000
Aluminum siding
254,400
282,000
258,.000
Cedar shake siding
. 559,200
504,900
336,000
Louvered glass doors
,000
420
420,000
Thermal windows
-- 464.400
l.
2.
.l.497.600
Pl.224.000
Pl.347.300
P36,900 gain
B.
P86,400 loss
C.
P40,800 loss
D. "P82,500 gain
MANGO BANGGO purchased a mango farm in Aug1 Jst 2014 for P2,250,000. The purchase was
risky because the growinq season was coming to an end, the mangoes must be ha rvesr.ed in
the next few weeks, and Mang" has limited experie;;i e iQ carrying off a mango harvest.
At the end of the first cuarter of operations, Mtngo is feeling pretty good about his early .
.
results. The first harvest was a success;, 30,000 kilos df mangoes were harvested with a value .
of fi90,000 (based on current local commodity pric-:s at the time of harvest). The fair va1ue of
Mango's mango farm has increased by P45,000 a : the end of the quarter. After storing the .
mangoes fo r a short period of time, Mango was abl: to sell the entire harvest for PlOS,OOC.
'3. What amount of gain should be reco nizea 011 the change in fair value of Mango's mango
farm?
A. PlS0,00 0
B. P45,000
C.
P90,000
D. P135,000
4. At-what amount should the mangoes harvested be initially recorded on Mango's books?
A. P90,000
B. P105,0 00
C. P60,000
0. PlS0,000
Pa.ge 3 o 12 !'a_ges .
APPW7502
5 . What i; the total eft'ect qn income for the quarter related to Mango's 'biological asset and
agricultural produce ?
B.
A. P150,000
---- -
-- - -
-----
--
---
'
C.
P45,000
000000 ( >00
------
--
D. P60,000
PlS,000
--
PROBLEM NO. 4
A depreciation schedule for semi-trucks of ISIDRO MANUFACTURING COM NY was rt!quested
_
by your auditor soon after December 3 1; 2tl14, showing the addrtrons, retirements,
depreciation, and other data affecting the income of the company in the 4-year period 20 1 to
2014, inclusive.
P180,000
220,000
300,000
240,000
P940.000
..
' 1:
---
Truck N o . was traded for a larger one (No. 5), the agreed purchase price of
which was 1>400,000. Isidro Mfg. Co. paid the automobile dealer P220,000 cash
on the transaction. The entry was a debit to Trucks and a credit to
P220,000. 1he transaction has comm :!rcial substance.
July 1, 20 1 1
Cash,
Jan. 1, 2012
Truck No. 1 was sold for P35,000 c;:d1; entry debited Cash and credited
Trucks,
P35,000.
July 1, 2013
A new truck (No. 6) was acquired for P420,000 cash and was charged at
amount to the Trucks account. (Assur.1e truck No. 2 was not retired .)
TrucK No. 4 was ,damaged in a wred . to sch an extent that rt was sold as junk
for P7,000 cash. Isidro Mfg. Co. received P25,000 from the i nsurance company.
The entry made by t:he bookKeeper '"as a debit w Cash, P32,000, and credits to
Miscellaneous Income, P7,000, and Trucks, P25,000.
.
July 1, 2013
1.
2.
3.
"\..
depreciati on had been made at the clos( of each year as follows: 20 11, P210,00D;
; 2014 , P304,000.
2012 , PllS,OOO; 2013 , P250 ,500
Entries
that
"'
4.
for
depreciation
B.
P198,000
..
.
of Truck #3 :i n July 1, 2011?
. t he gai n (loss ) on trade in
What JS
c. (P60I 000)
B. P lO I 000
A. (P30 ,000 )
31, 2014 ?
1 ue 0f th e Trucks on De-e mbe r
What is the net book va
-C P228 soo
B. p ..., 48 '000
A. P41 4,0 00
'
D. P 190,000
D. P894,000
APPWZ5
. 02
2014)?
A.
480,000.
9,500
140,000
665,500
140,000
C. Accumulated depreciation
665,500
Trucks
480,000
185,500
480,000
45,500
Retained earn:ngs
665,5 00
--
000()()()()(>0
-------
-- ------
665, 500
-------- -----
PROBLEM NO. 5
reports
The state mem of financial :Jositio n of MADRIGAL CORPORATION on December 3 1 , 2013
the
show
company
the
of
s
d
r
eco
Trading Securities at fair value 01' P670, 770. Sup Jorting r
following debt and equ ity scuritie:
. '
p l,6,350
Security
600 Condura Co. ordinary share.5
P240,000 Sinker Co. 7% bonds
P360,000 Floater C(I. 7 1/2% bonds
238,950 .
362 250
-==
-P677,550
Total
r-
Cost
Jan.
. l\pri l
11av
July
1
21
1
.\u1.
15
Dec.
31
. 0v.
p 72,900
Fair Value
232,200
365,670
P670,770
Sold P180,000 of the Floater Co. bond at 102 plus acc ru ed interest.
Brokerage
Received dividend of P0.25 per share or. the Condura ordinary shares.
RE:ceived serni;1nnual intere st on bond:;.
Brokerage fees were P750.
Purchased 300 13obber Co. ordinciry sha;,!:, at P l 16 pius brokerage fees of P150.
Market prices o f secu rities were: Cond.ira Co. ordinary shares, P l lO; Floater Co.
bonds, 101 3/4 ; Leade r Co. b ncls, 101; Bobber Co. ordinary sha res, P116.7 5 .
2. What is the g a in (loss, on the sale of Sinker Co. bonds on July 1, 2014?
A. Pl,800
B. (PS,700)
C. P l , 050
D. (P4,9 50)
3.
What is the total interest i n come ' on bonds th<it should pe re ported in M ad rig a l's income
D. P:)4,025
AP-PW7502
4.
What
i:>
the
unreal zed g a i n
(loss)
on
i:racJ
ng securities
Madriga1's income statement for the year ecded. December 31, 201
5.
A. (P8,625)
B. P8,100
C.
(Pl,845)
oooOOOO)O
D. (P6,360)
be reported in Madrigal's
D. P8,750
----------------------------
.:
PROBLEM NO. 6
The following list of accounts and their balances epresents the unadjusted trial balance of
ALTERADO COMPANY at December 31,' 2014:
Cash
Equity investments ftrading)
Accounts receivable
Allowance for doubtful accounts
Inventory
P repaid rent
Plant and equipmem
1 . The
P290,900
600,000
690,000
and
547,200
360,000
1,600,000
equiprr ent
1,544,000
1 1 0,000
320,000
20,400
8,900
110,500
P6.201.900
da ta:
p 5,000
147,400
1 1 3,700
900,000
1, 700,000
971,800
2, 148,000
216,000
P6.201.900
balance in the :nsurance expense account contains the premium costs of three
policies:
Po l cy ' reinin1 c o of P25,500. 1-year erm, taken out on May l, 2013;
P ol 1q L, onginal c1 1st or P72,0uu, J-year te n, ;:akn 0ut on .OdW;>r 1 2014
Policy 3, original cost of P13,000, 1-yea_r"ter-il, taken out on Ja n ua ry 1 2014 :
2.
3.
4.
5.
On
ei gh teen-
The regular rate o f de prec i a ti o is 10% per Y ar. Acquisitions and retirem nts during a
year are depreciated at half this rate. There were no purchases during the year. on
and equipment account was P2,400,000.
December 3 1, 2013, th e balance of the Plant
bookkeeper
On December 28, 201--1, the
31 ,
00
.
id
2014 sala ries and wages accnied but unpa were P4,2 ,000
le.
Ph h
Page 6 of 12
.
P:>;e
s.
1.
P3 0' 000
B.
P360, 000
P240,0 00
c. . P200,000
P104,500
110,500
56,500
44 I500
0
54,000
66,000
d epreciatio n
p 6,000
c.
D.
3.
0f
Prepaid isu
1 1
onCt:,
r
-
S.
2.
APPW7502
_
_
31, 2014?
D. P160,000
Interest income
D.
B. Prepaid
Prepaid rent
C.
Prepaid rent
Rent expense
D. Rent expense
"
P 36,000
180,000
180,000
36, 000
P24, 500
17,500
24,500
17, 00
B.
c.
A.
Rental income
Prepaid rent
-. . - - - - - - - - - - - ----------------
I:
0000000<1()
-----------------------------
PROBLEM NO. 7
DONNA MANUFACTURING COMPANY was incorporc"ced on January 3 , 2013. The company's
financial statements for its rlrst year of operations were not audited by a CPA. You have been
engaged to audit Donna\ financial statements for the year ended December 3 1, 2014.
Presented below is Donna's trial balance (partiai) on )ecember 3 1 , 2014.
p 330 ,00 0
Debit
Cash
Accounts receivable
Allowance for bad debts
Inventorie
Equipment
Accumulated depreciaticin
1)
2, 550,000
780,000
315,000
870,000
720,000
1,500,000
1,470,000
?repayments
Organization costs (Information
Goodwill (Information 4 )
6)
1 ( Information 2 and 3)
2)
1,275, 000
1, 1'55,000
2,250,000
870,000
Machinery
Patents (Information
Page 7 of 12
P.Jges
p 15,000
300,000
APPW7502
Ii
J
Additional information:
l.
WEi- . acquired
ove machir.ery
The patents had a
:. Donna purchased two licensing agreements on J<1 1uary .3, 2013, which were believed at that
i::ime to have unlimited useful lives. The balance of Licensi ng Agreement 2 was redu ced by
'i'30,000 for the advance collection of revenue from the agreement. .
3. J.n December 2013, an explosion caused a 6tl% reduction in the expected reven eproducing value of Licensing Agreement 1.
The recoverable amount of LicensrQg
Agreement 1 was determined to be P600,000 at C ecember 31, 2013.
The balance i n the Goodwill account incluaes P 720,000 paid December 31, 2013 for an
4.
advertisi ng program which it is estimated will <1ssist i n increasing Donna's sales over a
period of four years follcwing the disbursement.
b.
P450,000 cost of in;provements with a tota l estimated useful life of 12 years , wt-ich
movab le assembly-line equipment costing P330,ooo; which was' Malled in the ]eased
Donna paid its rent i n full during 2(}14. A 10-year nonrenewable lease was signed Janu 3ry
J, 2013 for the leased building that Donna used fc t manufacturing operations.
The balance in the Organization Costs account lndudes pre-operating costs incu rred during
.
the organizational period.
6.
r -...
1.
2.
3.
'1 .
1
I
I
I
D. P2,040,000
A.
Pl,500,000
B. P600,000
i.:.
P900,000
D.
P2,100,000
What is the carrying amount of the Leasehold inurovemenrs en December 31, 2014
C . , [>450,000
B. P780,000
D. P624,000
A. P360,000
The net adjustm ent tc Retained earnings to rf!eq all the necessary correcti ons from
information 1 to 7 will ;:im ount to
A'.
B.
C.
D.
P2,535,000 debit
P2,580,000 debit
P2,535,000 credit
P2,580,000 credit
--------- -- --------
----- ----
PROBLEM NO. 8
-'
res;
.
-1 OOO/ 000 sha
thonzed ' >
Ordi nary shar e capital, I'S par va 1 ue, au
issued, 400,000 shares
P2,000,000
.::
ctlOOl.OfTHE PHll.IPPINES(CP/\!ll
..vr
,;I
Nov. 27
pate
De:. Q}
Voucher N o .
11
20
21
22
31.
Amount
p 78,400
t 1 1 1 uo1li
821
Cash disbursements
Sun Jlier
797
829
836
842
856
865
APPW7502
l !3ffibutors
Parker Sales
19,600
..
w,100
Mohamed Dealers
17,150
Browen M :rchandising
22,050
80,850
Barry Tra(lers
78,400
E1Q,55Q
36, 750*
11:
Pl,64
5,000
al.:.!..
n_
ur
:.
a-=
se
.;. -=
s
=
-=
jo..:..:.
::...
1 rc
?;:...:.
.h
Voucher Nos. 821 and 836 canceled as oods were retilrned in December.
1.
What is the adjusted balance of the Vouchers Jayable account on December 31, 2014?
D. f!>344,250
' C. ?303,800
A. P310,000
B. P306,750
2.
4.
B. PB,000
A P28,750
.
? P?id vouchers?
PS,050
1...:
D.
P 0
0. P41,800
A.
B.
5. In a payables applirntion, checks are; autriori !ed and paid based on matching purchase
.
An
Partial payments are common.
orders, receiving repore;, and vendor invoices.
appropriate audit procedure for verifying that .1 purchase order has not been paid twic,e is
to sort tl1e
A. Check register file by purchase order, corruute total amounts paid by purchase order,
compare total amounts paid wih purchase order amounts, and investigate any
E3.
C.
D.
discrepancies between the total amounts p.iid and purchase order amounts.
Receiving report file by vendor invoice a ;nounts and i nvestigate any discrepancies
order, compare tota l amounts received wit 1 purchase order amounts, and investigate.
any discrepancies between the total amouns received and purchase order amounts.
--------------------------
--
000() ()()0<10
-----------------------------
i>ROBLEM NO. 10
On April 21, 2014, a fire d<1maged the office and w.irehouse of MUNTINLUPA COMPANY. The
only accounting record savd was the general ledgcr, from which the trial balance below was
prepared:
Muntiniupa Company
March 3 1 , 2C 14
Cash
Debit
p 180,000
Accounts receivable
400,000
red it
AP-PW7502
850,000
Share premium
3.000.000
Retained earnings
PS.850.000
.
The following events occurred during 2014:
Jan. 5
1.
2. Jan. 16
3. Feb. 10
4. March 1
5 . April 1
6. July 1
7. Aug. 1
10,000 shares of authorized and u nissued ordinary share capital were sold fo PB
per share.
Declared a cash dividend of 20 centavos per share, payable February 1.5 to
20,000 shares of authorized and un ssued ordinary share capital were sold for
P12 per share.
A 30% stock dividend' was declared and is!lued. Market value per share is
currently P l 5 .
A two-for-one split was carried out. T ne par value of the stock was to be redu(ed
to P2.50 per share. Market value on larch 31 was P18 per share.
A 15% stod dividend was declared a .1 d issued. Market value is currentl'I" PlO per
share.
I
I
'
Based on the preceding information, determine the balances of the following at December 3 1I
2014.
1..
2.
A.
3.
4.
5.
B.
P3,214,250
c. P6,428,500
D.
P2,795,000
B.
Pl ,020,000
c. P3,567,750
D.
P2,310,000 .
B.
Pl,853,750
c. P338,860
D. P306,610
Share premium
A.
P2,277,750
Retained earnings
A.
P596,000
D . 989,000
----- - -
-- - - ----------------- -- - - -- - -
PROBLEM NO. 9
Al l invoices are subject to terms 2/10, n/30 and are entered net
which uses a voucher system .
se Discount colurr n of the voucher register. The accounta nt
with the discount entered in Purcha
i ave .to attend to his family based in New Jersey. A
in charge of ttie books went on :
ed to record th transa !Qn . At year-end, the substitute
accounting graduate has been assign
l
l
ers do not .a gree with the Vouchers Paab e contro
accountant finds that the unpa id vouch
er.
account. You are called to adjust the matt
esh
s
Page ') of 1 P:.i;e
I; :
. \
: PHILIPPIN ES (CAR)
APPW502
La nd
750,000
B ui ld i n g
350,000
Accumulated depreciati on
Other assets
1 , 100,000
56,000
Accounts payable
-.
237,000
Accrued expenses
Ordi ary sha re cap ital, PlOO
par
Reta ined earnings
Sales
Ir
I
180,000
1,000,000
520,000
1,350,000
Purchases
520,000
Operating expense::;
344,000
Totals
21 .
p 413,000
P3.700.000
P3.700.000
I
\.
l\n examination of ti1e April bank statement a n d cancelled checks revealed that checks
written du ring the period April 1 to 21 toti!ieci P130,000: P57,000 paid to accounts
paid for
payable as of March 3 1 ; P34,000 for April ml:rchandise p u rcha ses ; and P39,000
consisted
which
,
P129,500
other expenses. Deposits during the same period amour:ited to
refund from a
of receipts on account from customers with the exception of <1 P9,500
v en d or for merchandise returned in Jl.i;ril.
c.
d.
April merchandise purchases, including P23,00 ) for shipments in transit on that date.
foi;
The insurance company agreed that the fire lo ;s claim sn o u ld be based on the assumiJtion
that the overall gros!; profit ratio for the past two years was in effect during the current
year. Tl1e company'$ audited financial statemrnts disclosed the following informati o n :
e.
20 J.
Net sales
Net purchases
Beginning ir.ventory
Ending inventory
f.
2012
P3,900,000
2,350,000
2,80(J000
500 000
660,000
500,000
750 000
Inventory with a cost of P70,000 was sc;lvagec1 and sold for P35,000. The
inventory was a total loss.
. '
1.
2.
How much is the sale:; for the period J a n ua ry l to April 21, 2014?
C. Pl,519,500
. A . Pl,430,000
B. Pl,510,00
.
D. P l , 506,000
How much is the net '.lurchases for the period anuary 1 to Ap ri l 21, 2014?
B. P660,000
C. P673,500
D. P650,500
_
A. P683,000
3. How much is the cost of sales for the period JCl 1uc;iry 1 to April 21, 2014?
A. P786,500
4.
S.
B.
P835,725
C.
P830,500
P579.500
B. P535,000
P;:ige
l l Ul
C. P477,000
12 I' ls
D.
P828,300
D. P570,000
D.
P512,000
,, .
.
CPA REVIEW
PROBLEM NO.
11
APPWZfilli
.
Seller Compa ny
On December 31 2012, BAIKAL COMPANY acquire d pie e of equipm ent from
credit ratrn g
Baikal's
note, payabl e in full on uEcem ber 3 1 , 2016.
by iss ing a
expected tc1
s
i
ent
The equipm
permits it to borrow funds from its several lines o f cre<jit at 10%.
of 1 at 10% for 4 period; is
have a 5-year life and a PlSD,000 salvage value. The present value
P1,2oo,ooo
0.68301.
2.
A. Pl, 090,903
D.
P341,767
D.
P819,612
COMPAl\JY purchased machinery on Decem b :?r 31, 2012, paying PS0,000 down anc
a1 reEing to pay the balance in four equi install ment; of P60,000 payable each December : i.
Implicit in the purchase price is an assumed imerest ot 12%.
OHRID
0.63552
3 . 03735
4.
5.
D.
P290,842
How much interest exp1:'!nse should be reported on Ohri d's income statement for the year
ended December 31, 2013?
A. P3 8, 13 l
8. P 2 1 , 86 9
C.
P 1 7, 29 3
D. P42,707
C
P144, 1 1 0
000000000
P99,31 0
D.
\. P120,000
!3.
--- - -------------------------
PlO l,403
---------- - - - - - - - - - - - - - - - - - - -
--- E ND ---
'
<"
MAY 2014
J:
PlOHLEM 1
1. A
2. B
3. A
4. c
5. A
PROBLEM 2
1. A
2. c
3. B
4.
5. A
PROBLE M 3
1. B
2. A
3. B
4. A
5. A
Pl\08LEM 4
1. B
2. A
3. I!
4. A
S. A
PROBLEM 5
1. B
2. c
3.
PR013LEM 6
1. D
2. c
3. D
4.
5. D
PROBLEM 7
1. A
2. B
3. D
4. A
5. A
PROBLEM 8
1. c
2. B
3. A
4. c
5. B
PROBLEM 9
1. B
2. B
3. c
4. c
5. A
PROBLEM 10
1. B
2.
4. D
5. D
PR0!3LEM ii
l. c
'
2. B
3-.
4. c
fl
3. D
. '
5. B