CPA REVIEW SCHOOL OF THE PHILIPPINES Manila AUDITING PROBLEMS SEPTEMBER 10, 2016 FINAL PREBOARD EXAMINATION ‘SATURDAY, 9:30AM ~ 12:30PM SETA INSTRUCTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. FULLY SHADE ‘ONLY ONE BOX FOR EACH ITEM, STRICTLY NO ERASURES ALLOWED. PROBLEM NO. 1 1% autre nen engaged tne WUSING Cnn, 2 wad consny, ht fs ced December 31, 2016. The company’s unadjusted trial balance as of December 31, 2016, is presented bon Masinag Company UNADJUSTED TRIAL BALANCE 960 ah December 31, 2016 ost DEBIT __|_ CREDIT 264,750 414,600 312, ash Finendal assets held for wading ‘Accounts receivable ‘Allowance for doubtful accounts ‘Notes receivable ‘Biscount on notes receivable, “Accounts recevabie — others 3s‘CPA REVIEW SCHOOL OFTHE PHIPPDNES (CPAR)- MANDA FINAL PREBOARD EXAMINATION 2. On December 29,2016, a customer's check for P3,000 was retuned bythe bank and marked SAUD Ceraun against undeared depost). Corresponding entry was made bythe cent On danuary 2, 2017. |, Verficaton of the other reconcling items inthe bank recondlaton statement as of December 31, 2016, revealed the following me 18) Abank debit memo dated December 15, 2016, for P123,750 renresenting payment of Semonth loan inclusive of interest of P3,750. Several bank deposts directly made by the customer in December 2016 totaling F22,500, ‘Interest income on various savings account depsis, P4600. 4) Undepesited collections from customers P10, S00 receved by the bank on January 2, 2047, 4 Tluded in the cash account is petty cash fund of P3,000. Among the fund items found ‘during January 2, 2017, count were: ee ingen eae a are cna share was P8.10 (Note 1) ver 30 SENSEeer creck IE SLIPS (CHAR) DHA Collections from consignees. ‘Note 1. Goods delivered to consignees were marked upto 25% of cost. Unsold goadsin possession ofthe consignees as of December 31,2016, costing P120,000 were not Included in the ending inventory. ALLOWANCE FOR DOUBTFUL ACCOUNTS sed on the analysis ofthe collet ofthe oustanding receivables ofthe company: iS ‘2ccount should be adjusted to 7.5% of Accounts recewvable - trade, : NOTES RECEIVABLE 7, om December 1, 2016, Nasinag sold land in exchange fr a P180,000 neviterest YS) So er nck“ 10% riestrte was the ging marke tefor smiar notes, POSTE Pd paid P56,000 to acquire the land in 2012. The accountant made the enuy paces ane Ra iy | eee = any ema ised fn Er can ee rs ag her 00 + ow serTonts iti 18, You observed tisfed‘CPA REVIEW SCHOOL OF THE PrILIPPINES (CPA) - ANIL FINAL PREBOARD EXAMINATION. owe 2. Inventory of supplies as of December 31, 2016, revenled tht Pi,200 were Sil ‘unused at year-end, note 3 Wasinag renewed the lease contrac fo 3 years with Lessors, In. subject to Tenses asics years with a prionty right to buy the propery ifthe owner dens ey tes on, The company paid a deposit equivalent to three months rental and we sea ental fra year, The lease contrac states a monthly rental of P6000 and became effective July 1, 2016. si R ull on1uae Bape ofnonas ol ges nos eRe at hy ereesis 908 come Mapa tI 10) On dne 1, 036, Masnan purchase as a longterm invest 240 of te 1,000 fs oa nS rnique Corton fr 221,450, The bonds were purdiwsed to Yield value, 8% bond aris payable semianrualy on December 1 and june 4, The bands se eine 2021. Masinag uses the effecve interest metnod of amartzaton. ‘Te only erty made by the company relative to ths investment was forthe recent of iterea of P5600 on December 1, 2016. LAND AND BUILDING t 41) ‘Masinag recently acquired a building and the surrounding land. “The company’s accountant cestithce 2 ste Land and Buling account and has made the follwing eres: 2016 January 3 Acquistion a re ‘of insurance on building (2 years) ae jon building ! 1 Ercertinment costo femiorze the puble wih ew feity opened that day Dec.31 Depreciation for 2016, computed by straight-ine ‘method with 20-year life Balance mertn SERS OH ge Ste oe 13) Accounts payable account includes deposits from customers amounting #0 P25/000. ESTIMATED WARRANTIES 18) Masinog has a one-year product waranty selected tems. The estimated Woreeey tity ar ales made ding 205 ad et ottonding as of December 3, 2015, amcure to PLCS0O, The werroiy cst en saes rade in 2016 are estimated at A200, Te ‘actual warranty costs incurred during 2016 are a follows: ‘Warranty claims honored on 2015 sales. Warranty cans honored on 206 es 16,500 22500 ‘upon payment ofthe above, the bookkeeper debited P39,000 to warranty eXPENSS. (OTHER EXPENSES Oa ee gel cael Deleves hat an ufooreble OUEST VEY FT, fa domanes, Masa ore concaveve nd deed to et up he sean estimated eer bxs,000. This wes ined in the ther current lables acrount IGNORE ALL INCOME TAX IMPLICATIONS. iy Me “Required: onlte the acusted blonces of te flowing on December 31, 2016:FINAL PREBOARD EXAMINATION ‘eae S100. OFTHE PALIFINES (CAR) - MAN 12, Delivery equlpment Some ERHOME 8 isan oc uns 6D 13, Accumulated deprecation — Delvery equipment semana stg HE yy 0. PAD 00 90,000 pico 0-725 000 CS) ee Ie yuo cme Fa 15 EE smo gvimomm RD 37, Other current babies A. P15,000 8 45,000 Cc. 60,000 3,000 18, Sales A. P2,085,000 8, 2,088,900 cc pigst,o0 1,931,100REVIEW SCHOOL OF THE PHILIPPINES (CPAR)- MANILA [FINAL PREBOARD EXAMINATION “Seeman 10,2018 SATURDAY 9300 = 2008 Your examination reveals the folowing acktional information: 1) Check no. 3413 dated November 24, 2016, was entered in the Check Register a5 P300, Your txaminatin ofthe pid checks rete wth the December bank statement reveas that amount of this check is P30. na aes 2) Check no, 3417 was mutated and retumed by the payee. A replacement check (no, 3453) wos sued, Both cacks were ered inthe Check Regs ut no entry nas made > cancel check no. 3417. bs ge 3) The December bank statement indudas an erroneous charge of P80. 4) On danvary 3, 2017, the bank informed your cle that a December bank service charbe Of 2 was omitted from the sterent. 5) Your examination of the bank credit memo accompanying the December bank statemert disses tat it reresets proces from e rte rele colecon in December for 3,000. 6) The outstanding checks at December 31, 2616, are as folows: No. 3408 P40 No 318 P2814 No. 3417 800, No. 3419 5,788 Questions: 21. What isthe adjusted bank balance on November 20? A. Pi6,690. B, P16,732 P6774 , 16,804 its for the month of December should be 371,765 C. 375,724‘CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) - MANILA FINAL PREDOARD EXAMINATION “Siang | PHT2S00 | Wie veceved the goods only on January 6, Term & sipping paint: 2017. ‘Shipped in 2016. Yalsi —| FIIS,060" | Balance was Oe by our December [Lukas Company, ceded ‘shipment of your raw payable for 135 000to record purchases. "Yala i a suppber. 26, If the necessary adjusting Journal entry is made regarding the case of Concordia the net (2) eet on 2015 et rere oka Cay of re rsd GH SNS transaction with Falcon: ( ‘A. 30,000 over. C. 6,000 over. eae Sire aee Ba ie ie onrnre atl ton Lams Toes hag aa tea Dei eoenu sar aire cox paste, Bietievee: 6; Pati une 30, The adjusting entry to corect the receivable from Yakal is A. Purchases . Increase by P18,000. D. Increase by P90,000. D. 48,000REVIEW SCHOOL OF THE PHILIPPINES (CPA) - MANILA FINAL PREBOARD EXAMINATION 1) Invoices totaling Pe,100 logens wing 100 were etre nthe voucher este ny, i he ged were June.30, 2016 2) Invoices totaling 27,900 were entered in the voucher register in July, and the goods were ‘received in July, but the invoices were dated June. 7 1b) Sune invoices totaling P11,100 were entered inthe voucher register in June but the goods ‘were not received unl July. © Imo tang 715,200 (he fo wren were rece ne) wert cauhneoa sea 4) Sales of P26,400 were made on account on June 30 and the goods were delivered a thet ‘tie, but all entries relating tothe sales were made in July. Questions: ‘34, Whats the adjusted inventory on July i, 20157 A. P86 400 'B. PS4,500 3,600 . P102,600 132. What isthe correct amount of purchases for the year ended June 30, 20367, A. P584,100 'B. S82,200 C. PS59;800 . 576,000 33, What i the correct inventory on June 30, 2036? A, 144,000 , P132,900 c. 116,100 1. P135,900 should be increased by. . 27,300 ~ °D. P55,200FINAL PREBOARD EXAMINATION | ‘pA REVIEW SCHOOL OF THE PHOLIPPINES (CPAR) = MANILA, ‘questions: 436. What the patent's carying val on December 3, 2067 i mn 2c0 pasa nme ipza7ano 8,050 a. What isthe franchise's carrying value on December 32, 20167 ee Cee ae 1790 4 nats re waderar’s coring value on Deceiber 31,2018? Pe ses SPE rN », 799,000 19, intis tne al renchise lated exenss forthe year ene Decemb 31 20497 Qo kes Sree reas ie “0. wrt ste tal expenses resuting fom the tans transactions forthe year ede 7 Sener st 26" Res rans crema ae ve o00000000-~ = PROBLEM NO. 6 ay S007 tnformation for PANDAY CORPORATION'S Property, Plant and Equipment for 2016 is as follows: ‘Account balances at January 1, 2016:4 A SCOL OF THE PHILIPPINES (CPAR) - MANA ofa 4 On2uly 1, 2016, machinery and equipment were purchased ata otal ivoce cost of PE40,000; ational costs of 15,000 for freight end P75,000 for installation were incued. 5. Panday determines that the automtive equipment comprising the P345;000 belance at January 1, 2036 would have been deprecated a ttl amount of P4000 fr the year ended December 31, 2016 Questions: 41. Whatis the depreciation expense on machinery and equipment for 2036? A. P311,225. B, 316,500 C. P357,825 D. 306/825 (42), Whats the eal depreian {orth year ended December 31, 2016? p Omer aren esse Bae ai ry ea pe y Janne tal comets cerecaton tice on Sener 31, 20167 Npeszeser B p2asne?c. pape0se7 | D PRPS 4a.) What isthe net gain or los on asset cisnosals for 2016? A, 12,000 net gain 'B._P9,300 net gain P2100 net loss - B, PA2,000 net loss What is the total book value of Panday Corporation's property, plant, and equipment at December 31, 20167 A. 6,135,933, 8 peasy oP 3x3 > re fran“cen neview So)0DL. OF THE PHILIPPINES (PAR) - MANILA, FINAL PREBOARD EXAMINATION 6: Merchandise invertor costing P14,600 was in the warehouse at December 3, 2049, Pat ge Merch aed fom te pryscal cout at that date. The company uses the Parodie Inventory method. “assume all amounts are material and ignore income tax effects. Questions: 46. Sendong Companys net. income in 2015 is understated by fy Rn pat e00 B. PH9,100, .P35,100 b. P71,600 “42. Seong Company's net income in 2016 Is overstated by ‘e ‘A. P1600, 'B. 80,100 C. P8,100 D. P27,600 48, The retained earings reported on Sendong Company's statement of financial postion 2 ; December 31, 2016 s understated by A. P41,600 8. P33,500 cc. P13,000 D. P8100 LOTLOT, INC has usd the accrual bass of accounting for several years, Areview ofthe records, however, indieates tat some expenses and revenues have been handled on cash basis because ‘bf errors made by an inexperienced bookkeeper. Income statements prepared bythe bookkeeper ‘eported P530,000 net income for 2015 and P389,000 net income for 2046. Further examination Cf the records revess that the following items were handled improper. “Lent was received from a tenant in December 2015. The amount, P120,000, was recorded income at thet time even though the renal pertained to 2016, stent omitted from the records ofthat date Pave Yeen entered as expenses when paid inthe following year. The amounts of accruals, purchased rave been charged to expense accounts and atthe end ofeach year have ben gre, and e