Punongbayan & Araullo’s Auditing Problems Quiz EASY 1.
On July 01, 2007, one of FLOYD INC.'S delivery trucks was destroyed in an accident. On that date, the truck's book value was P900,000. On July 15, 2007, FLOYD INC. received and recorded a P42,000 invoice for a new engine installed in the truck in May 2007 and another P6,000 invoice for various repairs. What amount should FLOYD INC. use to determine the gain or loss on disposal of the truck? a.P900,000 b.P942,000 c.P948,000 d.P936,000
Henry Company had the following bank reconciliation at March 31: Balance per bank statement, March 31 Add deposit in transit Less outstanding checks Balance per books, March 31 Data per bank statement for the month of April follow: Deposits Disbursements
P P P P P
93,000 20,600 113,600 25,200 88,400 116,800 99,400
All reconciliation items at March 31 cleared through the bank in April. Outstanding checks at April 30 totaled P15,000. What is the amount of cash disbursements per books in April? a.P 89,200 b.P 99,400 c.P109,600 d.P114,400 3. BRAND CO. reported P9,000 of net income for 2007. The correct net income however was was determined that the ending inventory was overstated by P1,000. The only other error was with the beginning inventory which must have been: a. Understated by P1,000 b. Understated by P3,000 c. Overstated by P1,000 d. Overstated by P3,000 P11,000. It
On December 30, 2007, SWIFT CO. shipped to a customer merchandise with selling price of P37,500; terms net 30, FOB Shipping Point. The sale which is 125% of cost was recorded in January 2007 when the check was received from the customer. Ending inventory was determined by physical count on December 31, 2007. As a result of the above transactions, SWIFT CO.’s cost of goods sold for the year ended December 31, 2007 was: a. Understated by P3,000 b. Overstated by P30,000 c. Overstated by P37,500 d. Correctly stated BART Company started operations on January 01, 2008. The following are available as of June 30, 2008: Purchase of merchandise P 450,000 Inventory, June 30, 2008 75,000 Goods were sold at 50% above cost; 75% ofsales were on account Estimated bad debts 1% of credit sales Collections from charge customers 315,000 Allowance for doubtful accounts, June 30,2008 after write off of uncollectible accounts 3,903.75 The outstanding accounts receivable as of June 30, 2008 were: a.P110,000 b.P106,875 c.P106,560 d.P285,000
PRIME Co. received from a customer a one year, P500,000 note bearing annual interest of 8%. After holding the note for six months, PRIME discounted the note at Asian Bank at an effective interest rate of 10%. At the date of discounting, PRIME should recognize a. P 40,000 interest revenue b. P23,810 interest revenue P13,000 interest revenue d. P 4,762 interest expense
Information pertaining to Trace Company for the month of August appears below: Balance per bank statement P 310,000 Balance per books 187,500 Deposit in transit 70,000 Service charges 2,500 Note collected by bank 75,000 Outstanding checks ? An analysis of the cancelled checks returned with the bank statement reveals the following: a. Check for the purchase of merchandise was drawn for P155,000 but was recorded as P150,000. b. The management wrote a check for traveling expenses of P25,000 while out of town. The check was not recorded. What is the amount of outstanding checks on August 31, 2006? a.P150,000 b.P140,000 c.P125,000 d.P230,000
The inventory on hand on December 31, 2006 of LEISA CORP. is valued at a cost of P300,000. The following items were not included in the inventory: a. Purchased goods in transit shipped FOB Destination, with price of P30,000 which included freight charge of P5,000.
250 What should be the balance of the Retained earnings account as of December 31. c.875. 2007 150. at a sales price of P10.500 d.P416.P419.000 cash. 2007: Total income since incorporation P 7.000. Still Trading made investments in available for sale securities.700 at December 31.800.P111. Goods out on consignment with sales price of P30.000 312. 2007.000 C common 2.000 700.500 9.000) 125.500 Excess of proceeds over cost of treasury stock sold 131. December 31 850. On July 01. Machine 1 was sold for P375.500 625.500 362.000 2008 ( 50. Shipping costs amounts to P3.P 4.
The machines were believed to have a useful life of 10 years without residual value.
Goods held on consignment by LEISA CORP. 2007. On January 01.000 net of income taxes.b.000 Henri Company purchased for cash on January 01.000 b. 2007? a.000 to deliver the goods. Henri paying P300. 2007 after adjustment of the books? a. 2007 ( 50.6
Ordinary shares (P100 par value) Share premium in excess of par Retained earnings 625.000 d.800
AVERAGE 1. A shares were quoted at P1.000 b. Dell Corp.000 2008 180.P337. January 1 700.000
2. The following information was abstracted from the accounts at December 31.000 shares 808. excluding a 20% commission on the sales price.000 2008 180.P 31.750
12.000 for the difference with the trade in value of the old machine. The following amount were reported in the previously issued financial statements.500 3. The company records depreciation annually on a monthly basis. Which of the following amounts should be reported as prior period adjustments and net income in Dell Corp.000 Machine 3 900. of shares Cost Market A common 600 shares P922. Purchased goods in transit FOB Shipping Point with invoice price of P60. three machines which cost a total of P1.000.800 d.031.750 c. Goods sold in transit FOB Destination with invoice price of P49. Freight costs amount to P6.500 653.500 270. While preparing its 2008 financial statements.320 per share and C common shares were quoted at P414 per share.000 Retained earnings.500 841. In analyzing the shareholders’ equity section of the PEARSON CORP. the shares of B common were sold for P210. The proceeds were credited to the Machinery account.000) 150.000.000 200.000 which included freight charge of P4.500 c.750 Total value of stock dividends distributed 562. 2006 showed the following: No.P387.P130.000 c.P805.000 Dell Corp.000 Machine 2 750.875. What is the correct inventory on December 31. Net Income a.000 637.000 b. Estimated selling prices of the machines were: Machine 1 P 600.000.031. On December 31.000.500 b. P 7. These errors resulted in the overstatement of each year’s income by P25.000) 180.000 Net income 150. 2007 2006 Retained earnings.000 B common 225 shares 229. Freight paid by LEISA CORP.000 c. 2006.500 Proceeds from sale of donated stock 843.000.P481.41.’s 2008 and 2007 comparative financial statements? Year Prior period Adj.800 On July 01. P 10. 2007.250 d.000. The Unrealized gain or loss account has a debit balance of P38. d.P 17. discovered computational errors in its 2007 and 2006 depreciation expenses.250 10.500 P810.000 c. An analysis of the investment account on December 31. was P1.000.000. Machine 3 was traded in for a new machine (No. What should be the balance of the Accumulated depreciation – Machinery on December 31.The following data are taken from the shareholders’ equity section of the balance sheet of FLOOD CORP. P 6.437.07
.000 Total cash dividends paid 2. 2007 125.000 d.31. net income is correctly reported at P180.500 b.218.P410. 4) which had a cash price of P750.000. 2007 ( 25.P 91.
12. 2003.000 500. How much is the required increase in the Unrealized gain or loss account at the end of 2007? a. 2006 assuming LEISA’s selling price is 150% of costs? a. 2006.000 2008 180.
500 for realty tax arrears for prior years.923.
Use the same information in number 6 above.000. P 28. c. There were no other errors during 2007 or 2008 and no corrections have been made for any of the errors. Landscaping and parking lot cost the company a total of P120.750 d.000 should be set up as Allowance for Doubtful accounts. but the sale was not recorded until 2009.000 of the P1.P184. In order to make the building suitable for the use of CONCORD CO. Cline Company's December 31 year-end financial statements contained the following errors: Dec. P 185. the balance of Allowance for Doubtful Accounts was P125.400.750 and also declared and issued a stock dividend.800 cash. Pen sold 500 rights that pertained to Lot A.250
Use the same information used in Number 4.692. 2007. 1.000
DIFFICULT Items 1 and 2 are based on the following: CONCORD CO. The gain on the sale of right is: a. Net income for 2006 is: a. Pen Corporation acquired common stock of Rap Company as follows: LOT DATE NO. on the purchase. P 135. 2.P4.P3. 2007? a.000 b. The cost of the land was: a. purchased real property for P3.P2. Ignore income tax considerations.800. 2008? a.P 35.P4. pay interest semiannually on January 1 and July 1.P3. OF SHARES COST PER SHARE TOTAL COST A January 25 800 560 448.. Twenty percent of the purchase price should be allocated to the land and the balance to the building.P2.P645.Retained earnings overstated by P1.000 while repairs in the main hall were P16.000.741.140 shares c.208 b.500 b. 2007 Dec. The additional provision required for the company’s doubtful accounts is: a. management with proper recommendation from the company’s legal counsel.P3. 2007 entitling holders to purchase one new common share at P450 for each ten shares held. On November 8. How many new shares of RPP common were acquired by Peninsula through the exercise of the stock rights? a.P 75.P5. 2008_________ Ending inventory P3.Retained earnings understated by P1.P190. The prepayment was recorded with a debit to insurance expense.000 understated P4.P200.000. 2007.800. 8% bonds of Olay Corporation for P3.000
Use the following information for questions 8 and 9. b.125
. has decided to write off accounts with balance totaling P40.500 c.000 d.123.Working capital overstated by P600. The bonds which mature on July 1.400 overstated Depreciation expense P 800 understated An insurance premium of P7.667.800 c. b. the rights were being traded at P20 each and the stock ex-rights were being traded at P620 per share. What is the total effect of the errors on the balance of Cline's retained earnings at December 31.400 b.400
6.000.906. What is the investment carrying value at December 31.000 face amount .P3.
10.125 c. Sales price was P25 per right.200 was prepaid in 2007 covering the years 2007. What is the total net effect of the errors on the amount of Cline's working capital at December 31. 2008.P3.200 c.Working capital understated by P1.P200.000 c.500. fully depreciated machinery was sold for P3. and 2009.000 b. How much is the interest revenue reported by Marcus Company’s income statement for year ended December 31.Retained earnings understated by P1.225.000 B April 5 600 600 360. Pen exercised the remaining rights on November 11. c. 2008? a. on December 31.168 shares b. d. On this date.000 The cost of the building was: a.000 Rap Company issued a 20% stock dividend on February 14.975.000 4.000 which included P67. A mortgage of P1. Common stock rights were issued on October 30.During 2007.000 to yield 10% per annum.600 d. 8. P 122.750 b.716.
7. On these past due accounts.000 was assumed by CONCORD CO.000 c. d. 2010. In your examination of the books and accounts of PLUM Company for the year 2008.708 5. The corporation paid a brokerage fee of P500 on the sale of the stock rights. 2007.P160. Marcus Company purchased 4.467.Working capital understated by P4.Retained earnings understated by P4. 2007? a. remodeling costs had to be incurred in the amount of P337.P765.600 d. During 2007.500 b.118 shares d. This however necessitated the demolition of a portion of the building.500. As of December 31.000 d.P2.P160.106 shares On July 1. Marcus Company classifies the securities as held to maturity. 31. 2007. 2008.P3.875. There were no other changes in stock issued and outstanding during 2007. c.Working capital overstated by P2. 31.P945. the company declared and paid cash dividend of P93.000 d. 2008. In addition.250 cash.800.P631. you have noted that the entire past due accounts of the company amounting to P200. which resulted in recovery of salvage material sold for P11.000.
750 and P5. 2009. you gathered the following: a.750 b. 2017. Jane Quipit. A check payable to a supplier.500
Selected ransactions during 2008 included the following: a. 2006. Of this total. 2008: 8. c. P214. 2005 P 320.P235.000 at December 31.000 and P264.P112.150 respectively.P225. released on January 05. P105. the bookkeeper-cashier handles cash receipts.000 and interest collected was P24. 2007. 2009 for P35. were paid at maturity with the exception of one P30. 2008.500 P210. a.000 814.000 note on which the company had to pay the bank P30. 2008.500 d.000
d. 2008. Determine the adjusted balances of the following accounts as of December 31. It is expected that recovery will be made on this note early 2009. P120. COLT INC. Customers’ notes of P600. 2007 includes the following receivables balances: Notes Receivable Less notes discounted Accounts Receivable Less allowance for doubtful accounts P365. The internal control procedures surrounding cash transactions were not adequate.3.564
Compute the adjusted cash to be presented in the balance sheet as at Dec.P175.000 Add : Deposit in transit P 157. DATE OF LOAN AMOUNT MATURITY DATE TERM OF LOAN Nov. Notes receivable discounted as of December 31. P285.350 c. in the amount of P13. 2007 and noted that the company regularly borrows from the bank in order to finance working capital.914 d. as of December 31.000 41. a.000 P856.725 c. the bank statement and the general ledger showed balances of P315. c. Loss of P3. 2008.P211. 2007 800. 2008.P112. P165.225 Balance P 486. P480. December 31.750 c. 2.489.P255.000 face amount 15 year bonds maturing on June 30. compute for the gain or loss on bond retirement.914 b. maintains accounting records and prepares the monthly reconciliations of the bank account. COLT INC. d. 2007 6 months May 01. On June 30. and released in December 2008.
Compute the adjusted deposit in transit as of December 31.075 Balance per general ledger P 264.00 Purchases during 2006 1.414
7.P157. The balance sheet for the Dixie Corporation on December 31. P320. b.410. a. Loss of P8. Voltron Inc. On December 31.900. 2007 and retired them. 2008.500.000 for 2007.000 d. 31. Interest is paid on June 30 and December 31.000 matured during the year without notice of protest. Ignoring income taxes. reported inventory of P360.000.000 d. 2008.000 Oct. reacquired all of these bonds at 96 on June 30. Notes Receivable (including notes receivable discounted). P600. A check representing advance payment to a supplier in the amount of P33. Gain of P10.000 c. 2008 9 months The client recorded interest expense of P150.275. Inventory. 31. h. Compute for the correct amount of interest expense that should be reported in the 2007 income statement.311
d.150 In the process of your audit.000 Use the following information for questions 8 to 9.725 Compute the adjusted outstanding checks as of December 31. 31.000 July 31.725 Note collected by bank 13.000. the company received and recorded customer’s postdated check amounting to P45.000 were discounted with recourse during the year. P204. with interest payable at maturity.000
.250 representing a correction of an erroneous bank credit. proceeds from their transfer being P585. Notes received in settlement of accounts totaled P825.000 b.P238.000 c.000 b. You are reviewing the notes payable and interest expense accounts of Cole Manufacturing Co.500. 01.P202.P222.414 c. The cut off bank statement showed a bank charge on January 02. P365. and bond discount and bond issue costs are amortized on these dates.000
10. a. The following schedule shows loans with 12% interest rate. At December 31. b.250 d. 2007 1 year Feb. 2007 1.075 b. P155. Gain of P1.000 9. 4. Notes Receivable Discounted a. had outstanding 10% P250. P212. 5. a.500 171.000 c. 2009. which included interest and protest fees.000
Items 4 to 6 are based on the following: You are conducting an audit of the MART CORPORATION for the year ended December 31. 2007 of bond discount and bond issue costs were P13. 2007.725 b.225 Less : Outstanding checks 222. 01.P279.000 respectively. Included in the list of outstanding checks were the following: 1.000 155. the date of which is January 04. The unamortized balances on June 30. 2006 P 500. P222. The following data were gathered to confirm the reported inventory figure. dated December 29.000 b.000 Jan.000. She prepared the following reconciliation at the end of the year: Balance per bank statement P 315. a. All loans are repaid at its scheduled maturity date and interest expense is 7recorded when the loans are repaid. 6. Notes receivable collected during the year totaled P270.
Compute for the total amount of bonus the president should receive in 2007: a.000. The president is to receive a bonus consisting of a basic amount equivalent to 5% of the company’s net income before deduction of bonus but after deduction of corporate income tax. if the fixed monthly salaries exceed their sales commissions earned for the month. P 625. P 750. Compute for the net profit for 2007 after deducting the president’s bonus and the corporate income tax. P 170.P 5.000 d. 2006? a.000
.Cash sales during 2006 Shipment received on December 26. P 250. issued a five-year note payable with a face amount of P2.000 3% C 45. 2006 Gross profit percentage on sales What is the estimated inventory shortage at December 31.000 5.P231.P50. P 65.P235. CYNDY CORPORATION reported a net income of P280. What amount of inventory on consignment and net income related to the sold units respectively should Aguila Company report on December 31. 2. the basic bonus will be increased by the company’s tax savings because the total amount of bonus is deductible in computing the company’s taxable income.000 and P44. P 172.000 c.352 c. P 9.000 b. 2006.800. In addition.000 b.000 Items 2 and 3 are based on the following information: Some of the information you gathered in the audit of the financial statement of CYNDY CORP.P225.000 transportation cost. 2006.000 plus accrued interest. December 31. The company is subject to a corporate income tax of 35% of its net income after deducting the president’s bonus.P375.000 b.000 b. 2007.000 d.000 2% B 35. P14. 2005 Accounts receivable.000
350.000 3% What amount should CATER COMPANY accrue as sales commission payable in March 2007? a. Amount due to consignor was remitted on the same date. 4. On July 1. P 500. On December 31. The tax savings is the difference between the income tax the company would have paid if there were no bonus and the taxes the company must pay after deducting the bonus. balance sheet should include: a.798 d. 2006? a. The terms of the note require Acro Manufacturing Company to make five annual payments of P500.500.000 and P40. P14. 2. Commissions are computed and paid on a monthly basis (in the month following the month of sales) net of fixed salaries. the current liabilities section of Acro’s December 31.000 in 2007 before deduction of the president’s bonus and the corporate income tax. a.136 3. Aguila Company consigned 50 computers at a unit cost of P15.649 b. HP Company reported the sales of 25 computers and returned 10 units.100 b.000.000 and P36.000 300.886 c. 3. P 9. P 70.000 and P32.000 c. Cost paid by the consignee on the returned units was P4.000 c. P170.000.000 1.P60. Commission rate as agreed upon was 15%. CATER COMPANY pays its sales representatives fixed monthly salaries and commissions on net sales. entered as purchased.000 3.387 d. 2008.000 d.000 20.000 250. goods were not received during 2006 Collections on accounts receivable during 2006 Accounts receivable. such excess is not charged back to them.000. Pertinent data for the month of March 2007 are as follows: SALES REP FIXED SALARY NET SALES COMMISSION RATE A P 25.000 and an interest rate of 10 percent.900
4. Acro Manufacturing Co. On October 01. 2006 included in physical inventory but not recorded as purchases Deposit made with suppliers. However.000 2.000 each and paid P20.000 10.000 P1. With respect to the note.P40. P175. with the first payment due June 30. December 31. P 170. 2007. are: 1.000 to HP Company for sale at P20.000 c. P 172.000 40% d.