CMPC 313 Midterms Departmental Exams

CMPC 313 MIDTERMS DEPARTMENTAL
EXAMS
1. An auditor tests an entity’s control of obtaining credit approval before shipping
goods to customers in support of management’s financial statement assertion of
1 point
Rights and obligations

Completeness
Existence or occurrence
Valuation or allocation
2. Sending accounts receivable confirmation letters to the client’s customers is

consistent with the auditor’s objective of validating client’s receivable assertion on:
1 point
Existence and valuation

Existence and rights
Completeness and rights
Completeness and valuation
3. Cutoff tests designed to detect credit sales made before the end of the year that
have been recorded in the subsequent year provide assurance about management’s
assertion of:A. Completeness
1 point
Existence
Rights
Presentation
Completeness
4. If the objective of a test of details of transaction is to detect the overstatements of

sales, the auditor’s direction of testing should be from the
1 point
Accounting records to the source documents

Sales journal to cash receipts journal
Source documents to the accounting records
Cash receipts journal to sales journal
5. Which of the following statements is valid relating to confirmation of accounts

receivable?
1 point
An auditor must consider using the negative form of confirmation when there is reason to believe
that there may be a substantial number of accounts in dispute or with inaccuracies or
irregularities
A negative form of confirmation is preferable to use when individual account balances of
customers are relatively large
A positive confirmation provides more reliable evidence than the negative confirmation because
the auditor can perform follow-up procedures if no response is received from the debtor
In positive confirmation, failure to reply must be regarded as a correct response, even though the
debtor may have ignored the confirmation request
6. As part of your audit of a client’s inventory balance, you created an expectation of

what should be the inventory balance by using the gross profit method. The difference
between your expectation using the gross profit method of estimating inventory as
against the client reported balance is above audit materiality level for audit of
inventory. What should you do next?
1 point
Extend audit procedures by doing further analytical procedures on the inventory balance.
Discuss with the management the implication of the significant difference and propose an
adjusting journal entry accordingly.
Extend audit procedures by doing test of details of the account balance.
Issue a qualified opinion on the basis of a material misstatement in the client’s inventory.
7. What form of analytical review might uncover the existence of obsolete

merchandise?
1 point
Inventory turnover rates

Decrease in the ratio of gross profit to sales
Ratio of inventory to accounts payable
Comparison of inventory values to purchase invoices
8. Purchase cut-off procedures should be designed to test that merchandise is

included in the inventory of the client company, if the company:
1 point
Holds the shipping documents for the merchandise issued in the company's name.
Has physical possession of the merchandise.
Holds legal title to the merchandise.
Has paid for the merchandise.
9. Which of the following is an internal control weakness for a company whose

inventory of supplies consists of a large number of individual items?
1 point
The cycle basis is used for physical counts.

Perpetual inventory records are maintained only for items of significant value.
The storekeeper is responsible for maintenance of perpetual inventory records.
Supplies of relatively little value are expensed when purchased.
10. A receiving department compares inventory items received with copies of

purchase orders. The purchase orders list the name of the vendor and do not list the
quantities of the material ordered. Using the purchase orders, the receiving
department is most likely to detect:
1 point
Unapproved sales orders.

Partial deliveries.
Deliveries for which no purchase order was issued.
Deliveries of a greater quantity of items than those ordered.
Use the following information to answer questions 1 – 2:

1. The misstatement on the net income for 2016 related to the above transactions is:
2 points
384,131 understated
164,131 understated
735,869 overstated
785,869 overstated
2. The carrying value of the notes receivable on December 31, 2016 is:
2 points
10,277,485
11,277,485
10,227,296
11,049,689
3. What is the correct net gain or loss from the transactions?

2 points
300,000 net income

140,000 net income
62,550 net income
97,450 net loss
4. What is the balance of Notes Receivable to be presented in the December 31, 2016
Statement of Financial Position?
2 points
2,200,000
2,276,180
2,400,000
2,162,550
5. What is the interest income for the period?

2 points
113,630
163,130
234,000
99,000

6. How much is the bad debts expense for 2018?
2 points
11,440
46,545
81,440
116,545
7. What is the net realizable value of KABOOM’s accounts receivable as of December

31, 2018?
2 points
4,159,335
4,055,050
4,218,560
4,019,945
8. What is the balance of KABOOM’s inventory as of December 31, 2018?

2 points
150,000
80,000
129,000
none
9. How much is the estimated inventory loss from the explosion?

2 points
1,437,420
2,390,050
1,566,420
1,486,420
Use the following to answer questions 10 – 11:
10. The December 31, 2018 inventory is understated by?

2 points
26,200
21,800
20,300
23,300
11. The profit before taxes for 2019 is overstated by?

2 points
20,700
Zero
21,800
7,400
12. What is adjusted purchases for 2016?

2 points
5,669,500
5,644,500
5,674,500
5,699,500
13. What is the adjusted December 31, 2016 inventory balance?

2 points
950,500
958,500
981,500
1,006,500
14. What is the correct gross profit for the period?

2 points
5,096,200
5,066,200
5,063,800
5,091,200
15. How much is the loss from the fire?

2 points
157,500
62,500
107,500
120,000
General Instructions: FINAL ANSWERS ONLY. Remove "peso sign", "commas", "decimal", "space in between
figures", "descriptions", "parenthesis", "+/- signs". Make sure to round-off your final answers to the nearest
peso, if necessary. For example, if your answer is "one hundred twenty-five thousand two hundred thirty-
seven, it should be encoded as: 125237

1. Compute for the total sales for 2018. *
5 points
Your answer
2. Compute for the gross profit for 2017. *

5 points
Your answer

3. How much is the bad debts expense for 2018? *
5 points
Your answer
4. What is the net realizable value of SKY’s accounts receivable as of December 31,
2018? *
5 points
Your answer

5. What is the correct balance of inventory as of December 31, 2018? *
5 points
Your answer
6. What is the correct net purchases for the period ended December 31, 2018? *
5 points
Your answer
7. What is the correct 2018 gross profit? *

5 points
Your answer
8. What is the total cost of the inventories possibly stolen under the FIFO retail
inventory method? *
5 points

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CMPC 313 MIDTERMS DEPARTMENTAL

Rights and obligations

2. Sending accounts receivable confirmation letters to the client’s customers is

Existence and valuation

4. If the objective of a test of details of transaction is to detect the overstatements of

Accounting records to the source documents

5. Which of the following statements is valid relating to confirmation of accounts

6. As part of your audit of a client’s inventory balance, you created an expectation of

7. What form of analytical review might uncover the existence of obsolete

Inventory turnover rates

8. Purchase cut-off procedures should be designed to test that merchandise is

9. Which of the following is an internal control weakness for a company whose

The cycle basis is used for physical counts.

10. A receiving department compares inventory items received with copies of

Unapproved sales orders.

Use the following information to answer questions 1 – 2:

Use the following information to answer questions 3 – 5:

3. What is the correct net gain or loss from the transactions?

300,000 net income

5. What is the interest income for the period?

Use the following information to answer questions 6 – 9:

7. What is the net realizable value of KABOOM’s accounts receivable as of December

8. What is the balance of KABOOM’s inventory as of December 31, 2018?

9. How much is the estimated inventory loss from the explosion?

Use the following to answer questions 10 – 11:

10. The December 31, 2018 inventory is understated by?

11. The profit before taxes for 2019 is overstated by?

Use the following information to answer questions 12 – 14:

12. What is adjusted purchases for 2016?

13. What is the adjusted December 31, 2016 inventory balance?

14. What is the correct gross profit for the period?

15. How much is the loss from the fire?

Use the following information to answer questions 1 – 2:

2. Compute for the gross profit for 2017. *

Use the following information to answer questions 3 – 4:

Use the following information to answer questions 5 – 7:

7. What is the correct 2018 gross profit? *

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