Professional Documents
Culture Documents
Notre Dame University Cotabato City Phil. - Auditing Problems (Mock Board)
Notre Dame University Cotabato City Phil. - Auditing Problems (Mock Board)
Jan.
Feb.
Mar.
Apr.
June
1.
1
28
31
1
30
Debit
P80,000
9,000
Credit
2,000
6,000
10,000
A cash dividend of P0.50 per share were received on Feb. 28. The
adjusting entry (assuming the use of the cost method) is:
a. Stock Investment
Dividend income
b. Retained earnings
Dividend income
c. Dividend Income
Stock investment
d. Cash
Dividend income
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
16,000
16,000
20,000
20,000
10,000
10,000
30,000
30,000
3. On March 31, 600 shares were purchased with the partial exercise of
these rights. The adjusting entry, after the adjustment in No. 7 above
has been given effect, is
a. Stock investment
Stock rights
b. Stock investment
Stock rights
c. Stock rights
Stock investment
d. Stock rights
Stock investment
18,000
18,000
12,000
12,000
12,000
12,000
15,000
15,000
4. On April 1, the remaining rights were sold for P6, 000. The adjusting
entry is:
a. Stock investment
Gain on sale of rights
b. Stock investment
Stock rights
Gain on sale of rights
c. Stock investment
Loss on sale of rights
Stock rights
d. Stock investment
Gain on sale of rights
6,000
6,000
6,000
4,000
2,000
4,000
2,000
6,000
4,000
4,000
5. On June 30, 460 shares were sold for P10, 000. Using the average cost
method, the adjusting entry is:
a. Cash
Stock investment
Gain on sale of stock
b. Stock investment
Gain on sale of stock
c. Stock investment
Gain on sale of stock
d. None of the above
10,000
7,500
2,500
10,000
10,000
2,500
2,500
The net adjustment in the Home Office books related to the Esperanza
Branch current amount is:
a.
b.
c.
d.
P75,700
65,700
86,200
94,820
P33,335
31,450
20,950
10,450
8. Before the above discrepancies were given effect, the balance in the
Home Office books of its Esperanza Branch Current account was debit
balance of P165, 920. The unadjusted balance in the Esperanza Branch
books of its Home Office Current account must be:
a. P92,336
b.
98,230
c. 104,500
d. 111,170
page 2
P84,
90,
99,
109,
807
220
200
120
Credit
P129, 600
68, 000
498, 400
2, 612, 000
Leila Maes has developed plans to extend into wholesale flower market
and is in the process of negotiating a bank loan to finance the expansion. The
bank is requesting 2008 financial statements prepared on the accrual basis of
accounting from Leila Maes. During the course of a review engagement, Marion,
Leila Maes accountant, obtained the following additional information.
1. Amounts due from customers totaled P128, 000 at December 31, 2008.
2. An analysis of the above receivables revealed that an allowance for
uncollectible accounts of P15, 200 should be provided.
3. Unpaid invoices for flower purchases totaled P122, 000 and P68, 000, at
December 31, 2008, and December 31, 2007, respectively.
4. The inventory totaled P291, 200 based on a physical count of the goods
at December 31, 2008. The inventory was priced at cost, which
approximates market value.
5. On May 1, 2008, Leila Mae paid P34, 800 to renew its comprehensive
insurance coverage for 1 year. The premium on the previous policy, which
expired on April 30, 2008, was P31, 200.
6. On January 2, 2008, Leila Mae entered into 25-year operating lease for
the vacant lot adjacent to Barons retail store for use as a parking
lot. As agreed in the lease, Leila Mae paved and fenced in the lot at a
cost P180, 000. The improvements were completed on April 1, 2008, and
have an estimated useful life of 15 years. No provision for depreciation
or amortization has been recorded. Depreciation on furniture and
fixtures was P48, 000 for 2008.
7. Accrued expenses at December 31, 2007 and 2008, were as follows:
Utilities
Payroll taxes
2 0
P3,
4,
P8,
0 0
600
400
000
2 0 0 1
P 6, 000
6, 400
P12, 400
page 3
8. Leila Mae is being sued for P16, 000. The coverage under the
comprehensive insurance policy is limited to P1, 000, 000. Leila Maes
Accounts receivableP64,
Inventory
291,
Accounts payable
54,
Sales
2, 612,
Purchases
1, 274,
Salaries
888,
Payroll taxes
51,
Insurance
34,
Utilities
50,
800
P63, 200
P128, 000
P192, 800
200
248, 000
43, 200
334, 400
000
68, 000
122, 000
176, 000
000 2, 548, 800 2, 500, 000 2, 675, 200
400 1, 220, 400 1, 166, 400 1, 250, 000
000
696, 000
600, 000
504, 000
600
47, 600
49, 600
50, 000
800
33, 600
36, 000
35, 000
400
48, 000
50, 000
52, 800
2009
July 1
The remaining bonds were called for redemption
and accrued interest was paid. For purposes of obtaining funds for redemption
and business expansion, a P8, 000, 000 issue of 7% bonds was sold at 97. These
bonds are dated July 1, 2009, and are due in 20 years.
19. What are the carrying value of bonds payable at December 31, 2001?
a. P5, 747, 280
b. P6, 000, 000
c. P141, 480
d. P135, 000
21. In recording the bond conversion on July 1, 200, how much should be
credited to the additional paid-in capital account?
a. P1, 796, 320
b. P1, 965, 440
page 4
d. P
34, 560
23. What is the carrying value of the bonds reacquired on December 31, 2008?
a. P989, 200
b. P957, 880
24. What is the gain (loss) on bond reacquisition on December 31, 2008?
a. P3, 300
b. (P3, 300)
c. P34, 620
d. P (P34, 620)
25. What is the carrying value of the bonds retired on July 1, 2009?
a. P3, 000, 000
b. P2, 974, 080
c. (P12, 960)
d. P0
800, 000
1, 600, 000
1, 845, 000
and
other
information
relate
to
the
a. BLUE ICE had 400, 000 authorized shares of P5 par common stock, of which
160, 000 shares were issued and outstanding.
b. On March 5, 2009, BLUE ICE acquired 5, 000 shares of its common stock
for P10 per share to hold as treasury stock. The shares were originally
issued at P15 per share. BLUE ICE uses the cost method to account for
treasury stock. Treasury stock is permitted in BLUE ICEs state of
incorporation.
c. On July 15, 2009, BLUE ICE declared and distributed a property dividend
of inventory. The inventory had a P75, 000 carrying value and a P60, 000
fair market value.
d. On January 2, 2009, BLUE ICE granted stock options to employees to
purchase 20, 000 share of BLUE ICEs common stock at P18 per share,
which was the market on that date. The option may be exercised all 20,
000 options when the market value of the stock was P25 per share. BLUE
ICE issued new shares to settle the transaction.
e. BLUE ICEs net income for 2009 was P240, 000.
Instruction:
Based on the information
necessary, answer the following question.
above
and
other
analysis
27. BLUE ICEs Common Stock balance at December 31, 2009 is;
a. P1, 160, 000
b. P900, 000
c. P800, 000
d. P1, 300, 000
28. BLUE ICEs Additional Paid-in capital balance at December 31, 2009 is;
a. P1, 860, 000
c. P2, 000, 000
b. P1, 960, 000
d. P2, 100, 000
29. BLUE ICEs Retained Earnings balance at December 31, 2009 is;
a. P2, 085, 000
b. P2, 010, 000
30. BLUE ICEs Treasury Stock balance at December 31, 2009 is;
a. P50, 000
b. P75, 000
c. P0
d. P125, 000
page 5
31. BLUE ICEs Stockholders Equity balance at December 31, 2009 is;
as
COMPANYS
property,
plant
and
Land
6,
Buildings
48,
Accum. Depreciation Bldg.
Machinery and equipment
36,
Accum. Depreciation Mach/Equip.
Automotive equipment
4,
Accum. Depreciation Auto. Equip.
Depreciation data:
Building
Machinery/Equip.
Automotive Equip.
Leasehold improvements
000, 000
600, 000
Credit
10, 524, 000
10, 000, 000
3, 384, 000
Depreciation
Method
150% declining balance
SLM
SYD
SLM
Useful
Life
25 years
10 years
4 years
-
above
and
other
analysis
as
33. What is the book value of the building at December 31, 2009?
a. P34, 596, 000
b. P35, 976, 960
c. P160, 000
d. P460, 000
page 6
c. P720, 000
d. P960, 000
c. P (56, 000)
d. P56, 000
c. P560, 000
d. P630, 000
40. What is the book value of leasehold improvements at December 31, 2009?
a. P6, 160, 000
b. P6, 048, 000
Therese
on
December
St. John
St. Therese
Sales
Cost of sales
Gross Margin
Depreciation and interest expense
Other operating expenses
Net income from operations
Gain on sale of equipment
Gain on bonds
Equity in subsidiarys income
Net income
750,
581,
169,
28,
117,
23,
3,
420,
266,
154,
16,
128,
9,
48, 000
35, 060
83, 060
(15, 000)
68, 060
=========
000
000
000
400
000
600
000
31,
000
000
000
200
400
400
8, 460
.
35, 060
9, 400
========
========
Statement of Retained Earnings for the year ended 12/31/02
41, 000
9, 400
50, 400
(4, 000)
46, 400
========
45,
43,
38,
195,
(35,
125,
300
700
300
000
200)
460
Accounts payable
Bonds payable
Capital Stock
Additional paid-capital
Retained earnings (from above)
8, 900
100, 000
154, 000
81, 600
68, 060
412, 560
========
412, 560
=========
6,
12,
20,
57,
(18,
400
100
750
000
900)
44, 000
9, 000
130, 350
========
18, 950
50, 000
15, 000
46, 400
130, 350
=========
page 7
St. John acquired 90% of the common stock of St. Therese for P120, 600 on
January 1, 2009.
2009
The following additional information is available in the first year after the
acquisition.
1. During 2009, St. John sold merchandise to St. Therese that originally cost
St. John P15, 000, and the sale was made for P20, 000. On December 31, 2008,
St. Thereses inventory included merchandise purchased from St. John at a cost
to St. Therese of P12, 000.
2. Also, during 2009, St. John acquired P18, 000 of merchandise from St.
Therese. St. Therese uses normal markup of 25% above cost. St. Johns ending
inventory includes P10, 000 of the merchandise acquired from St. Therese.
3. St. Therese reduced its intercompany account payable to St. John to a
balance of P4, 000 as of December 31, 2009, by making a payment of P1, 000 on
December 30. This P1, 000 payment was still in transit on December 31, 2009.
4. On January 2, 2009, St. Therese acquired equipment from St. John for P7,
000. The equipment was originally purchased by St. John for P5, 000 and had a
book value of P4, 000 at the date of sale to ST. Therese. The equipment had an
estimated remaining life of 4 years as of January 2, 2009.
5. On December 31, 2009, St. Therese purchased for P44, 000, 50% of the
outstanding bonds issued by St. John. The bonds mature on December 31, 2005,
and were originally issued at par. The bonds pay interest annually on December
31 of each year, and the interest was paid to the prior investor immediately
before St. Thereses purchase of bonds.
QUESTION:
Assume that the combination is accounted for as PURCHASE.
41. What is the eliminating entry for the Equity in subsidiarys income and
dividends declared by the subsidiary?
a. Equity in subsidiarys income
8, 460
Investment in stock of St. Therese
8, 460
b. Equity in subsidiarys income
8, 460
Dividends declared St. Therese
3, 600
Investment in stock of St. Therese
4, 860
c. Equity in subsidiarys income
12, 060
Investment in stock of St. Therese
12, 060
d. No Eliminating Entry
42. What is the eliminating entry for St. Thereses stockholders equity?
a. Capital stock St. Therese
45, 000
Additional paid-in capital St. Therese
13, 500
Retained earnings St. Therese
36, 900
Goodwill
25, 200
Investment in stock of St. Therese
120, 600
b. Capital; stock St. Therese
45, 000
Additional paid-in capital St. Therese
13, 500
Retained earnings St. Therese
36, 900
Investment in stock of St. Therese
95, 400
c. Capital stock St. Therese
50, 000
Additional paid-in capital
15, 000
Retained earnings St. Therese
46, 400
Goodwill
14, 060
Investment in stock of St. Therese
125, 460
d. Capital stock St. Therese
50, 000
Additional paid-in capital St. Therese
15, 000
Retained earnings St. Therese
46, 400
Investment in stock of St. Therese
111, 400
43. To eliminate the sales made by St. John to St. Therese, the entry is:
a. Sales
Inventory St. Therese (B/S)
Purchases
Inventory St. Therese (I/S)
b. Sales
Cost of sales
Inventory St. Therese
c. Sales
Inventory St. Therese
Cost of sales
20, 000
3, 000
20, 000
3, 000
20, 000
17, 000
3, 000
20, 000
3, 000
23, 000
Page 8
d. Retained Earnings
Sales
Inventory St. Therese
3, 000
20, 000
3, 000
Cost of sales
20, 000
44. To eliminate the entry made by St. Therese to St. John, the entry is:
(assume that Equity in subsidiary income has not been recorded by parent)
a. Sales
18, 000
Inventory
2, 000
Cost of sales
16, 000
b. Sales
18, 000
Investment in stock of St. Therese
1, 600
Retained earnings St. Therese
400
Cost of sales
18, 000
Inventory
2, 000
c. Sales
18, 000
Retained earnings
2, 000
Cost of sales
18, 000
Inventory
2, 000
d. Sales
18, 000
Inventory
2, 000
Cost of sales
20, 000
45. To record the items in transit and to eliminate the
payable/receivable, the entry is:
a. Accounts payable
4, 000
Accounts receivable
4,
b. Accounts receivable
4, 000
Cash
1, 000
Accounts payable
5,
c. Cash
1, 000
Accounts payable
3, 000
Accounts receivable
4,
d. Cash
1, 000
Accounts payable
4, 000
Accounts receivable
5,
inter-companys
000
000
000
000
46. To eliminate the acquisition made by St. Therese from St. John, the entry
is:
a. Equipment
2, 000
Accumulate depreciation
1, 000
Gain on sale of equipment
3, 000
b. Gain on sales of equipment
3, 000
Equipment
2, 000
Accumulated depreciation
250
Depreciation expense
750
c. Gain on sale of equipment
3, 000
Equipment
2, 000
Accumulated depreciation
1, 000
d. Gain on sale of equipment
3, 000
Equipment
2, 000
Depreciation expense
1, 000
47. The depreciation recorded by St. John at December 31, 2009 is:
a. Overstated by P750
c. Overstated by
P1, 750
b. Overstated by P250
d. Understated by P1, 000
48. The entry to eliminate the bonds purchased by
is:
a. Bonds payable
50,
Investment in bonds of St. John
Gain on extinguishments of debt
b. Investment of St. John
44,
Loss on extinguishments of debt
6,
Bonds payable
c. Bonds payable
44,
Investment in bonds of St. John
Retained earnings
d. Bonds payable
50,
Investment in bonds of St. John
Retained earnings
44, 000
6, 000
50, 000
44, 000
6, 000
44, 000
6, 000
page 9
For items 49-50, assume that the combination is accounted for as POOLING OF
INTEREST.
8, 460
3, 600
4, 860
060
12, 060
50. What is the eliminating entry for St. Thereses stockholders equity?
a. Capital stock St. Therese
45, 000
Additional paid-in capital St. Therese
13, 500
Retained earnings St. Therese
36, 900
Goodwill
25, 200
Investment in stock of St. Therese
120, 600
b. Capital stock St. Therese
45, 000
Additional paid-in capital St. Therese
13, 500
Retained earnings St. Therese
36, 900
Investment in stock of St. Therese
95, 400
c. Capital stock St. Therese
50, 000
Additional paid-in capital St. Therese
15, 000
Retained earnings St. Therese
46, 400
Goodwill
14, 060
Investment in stock of St. Therese
125, 460
d. Capital stock St. Therese
50, 000
Additional paid-in capital St. Therese
15, 000
Retained earnings St. Therese
46, 400
Investment in stock of St. Therese
111, 400
Page 10