AP-100 (Error Correction, Accounting Changes, Cash-Accrual & Single Entry)
AP-100 (Error Correction, Accounting Changes, Cash-Accrual & Single Entry)
AP-100 (Error Correction, Accounting Changes, Cash-Accrual & Single Entry)
CPA Review Batch 43 May 2022 CPA Licensure Examination Weeks 1 & 3
Koshu Co., a calendar year entity, contained the following independent errors at the end of each
reporting period: (Amounts in thousands)
Shilo Co. has been using the weighted average method of inventory costing since it began
operations in 2018. Shilo Co. has reported the following net income:
Beginning 2021 the company decided to change the inventory cost formula to FIFO method. The
following are the December 31 inventory balances under each method:
MI, end Per Books MI, End MI, End Per Books
(Weighted Average) (FIFO) Understated By
2018 P 180,000 P 200,000 P 20,000
2019 250,000 310,000 60,000
2020 330,000 440,000 110,000
Compute for the December 31, 2020 carrying value of the asset and the depreciation
expense for the year under each of the following independent cases:
You are auditing the financial statements of Brin Inc. for the year 2020. The details of the
unadjusted balances of its Accumulated Profit account are as follows:
ACCUMULATED PROFIT
Date Particulars Debit Credit Balance
01.01.2018 Beginning Balance 500,000
08.31.2018 Gain on sale of treasury shares 40,000 540,000
12.31.2018 Net income for the year 200,000 740,000
02.28.2019 Payment of dividends declared in 2018 70,000 670,000
05.31.2019 Paid in capital in excess of par 20,000 690,000
07.31.2019 Loss on sale of treasury shares 30,000 660,000
12.31.2019 Net loss for the year 80,000 580,000
12.31.2020 Net income for the year 150,000 730,000
12.31.2020 Payment of dividends declared in 2019 90,000 640,000
c. On January 1, 2019, the company paid an operating expense in the amount of P15,000
covering the period, 2019 to 2021. The company charged the entire payment as outright
expense and no adjusting journal entry was ever made pertinent to this transaction.
Juris Corp. accounts for its sales under the cash basis. For the year 2020, the total collections from
customers, including cash sales made and recoveries of previously written-off accounts, based on
Julius Corp.’s cash receipts books amounted to P1,700,000. Audit investigation revealed the
following additional information:
Compute for the Net Sales under the accrual basis of accounting.
Tin Corp., which maintains records under cash-basis, revealed total payments made to suppliers
amounting to P700,000. Additional information follow:
The Gian Co. began operations in 2019. During 2019, the bookkeeper used a check register to
record all cash receipts and cash disbursements. No other journals were used. The following is a
summary of the cash receipts and disbursements made during the year:
Cash receipts:
Sale of share capital P 90,000
Collections from customers 460,000
September 1, 2019, one-year, 12% loan 60,000
Total cash receipts P 610,000
Cash disbursements:
Payment of inventories P 230,000
Payment of salaries 80,000
Acquisition of equipment 90,000
Payment of rent 30,000
Miscellaneous expenses 11,000
Total cash disbursements P 441,000
Cash, End P 169,000
1. The company started its operations on January 2, 2019, on which date 216,000 ordinary
shares with a par value of P100 were issued in exchange for the following:
Cash P 1,800,000
Building, useful life of 15 years 16,200,000
Land 5,400,000
2. An analysis of the bank statements showed total deposits of P12,600,000. Included in the
total deposits were cash proceeds from the sale of the share capital made on January 2, 2019
for P1,800,000. The bank statement balance on December 31, 2019 was P900,000.
3. There were company’s checks amounting to P180,000, which were dated and issued in
December 2019, but paid by the bank in January 2020. Cash on hand on December 31, 2019
amounted to P450,000, which is inclusive of advances from a customer in the amount of
P135,000.
4. During the year, the company borrowed P1,600,000 from the bank and repaid P400,000 in
principal and P80,000 in interest.
5. Disbursements made during the year, not through check issuances, but from cash receipts,
were as follows: Utilities of P360,000; Salaries of P360,000; Supplies of P720,000 and
Dividends of P540,000. There were neither accruals nor deferrals of expenses at the end of
the year.
6. An inventory of merchandise taken on December 31, 2019 showed P2,718,000 of
merchandise.
7. Accounts receivable at the end of the year totaled P3,240,000. Of this amount, P180,000 may
prove uncollectible.
8. Unpaid supplier invoices for merchandise purchased amounted to P1,260,000 at the end of
the year.
9. Equipment with a cash purchase price of P1,440,000 was purchased on January 2, 2019, on
an installment basis. During the year, the total checks issued for the total installment price of
the equipment totaled P1,602,000, which all cleared the bank during the year. The equipment
has a useful life of 10 years and is being depreciated under the straight-line method.
Compute for the profit under the accrual basis for the year ended December 31, 2019.