INSTRUCTIONS: Select Uwe best answer for each of {towing quaston. Mark ely ene answer foreach tem on the ‘inswer sheat provided, Stet NO ERASURES ALLOWED. ‘Erasures wil ender your examaation answer shest INVALID, Use PENCIL NO. 2 only. GOODLUCKIO. PROBLEM NO. 1 Power Corporation ie a focal company engaged in, buying and Seling manufacturing equipmeat. On 1 January 2010, Power Corperaton sad equipment, wih a aah pice ol P500/000, to {Gay fara Company. The cost of the eqnoment i #780 00 {aay Rare signed 9 deferred payment cottract tnt provides for 8 ‘down payment of POD0,000 and 3. -year note for P,705,900 Te ndte 0 be poids 5 equal aru payments of F344, 100, The payments nclade interest and ave mate on December 31 of en yen, beginning on December 31,2010 ower Corporation mace the folowing entries in relation to the “ste fthe aqupmant ang the related note recewatle: | noua. 2030 cast 30000 Foes reevatie 11708;900 (Cost of goods sold 750,000 ‘sles 72,005,900 Tovertory 750,000 December 32,2010 cach 341,180 Nts receivable Poai,as0 ecembec 34,2031 cash Paai,i80 341,180 Totes recewable a Kiting Prosar sere fone Corporation reported tenes reccabiensaemert ancl poston & becember I, 2010 and 2041 os ‘trade and other receivables, pe ond oe (questions: Based onthe above nd the res of Your aud, ans he following: your mec atom <1 om és 2. Prot for 2010 overstated by rae Seo «9505.00 8 pata 6 Pasise0 4 Retncd earings of Oncember 32, 201 i vera by " cman 8 St,s00 S fatt3 4 The working apt a of December 31,2021 is overstate a P776,197 . P787,084 " 8 bene eo a 5. The acjusing tourna entry to correct the entry'made on January 1, 2010 would nce 3 3° Deb ta Sales 505/300, 1 Debi Sales 205/300, © Great Discount a9 notes receivable £205,200 4. Creat to Hotes recevabisP208,900 PROBLEM NO. 2 Your frm nas been engaged to examine the fancie statemerts 2f PRTC Corporation for the year 2011.” The Dookkeeser whe Fnac the Franca! records has prepared al he uroudted 1977, The cient provides you with the Information PeicwPRTC Corporation Balance sheet December 31, 2081 acts * Curent assets 71,881,200 Curren abies 962,400) ‘Other assets 5,171,400 Lang-tarm habiites 1,439,500 3 Gora £650,600 az Poszs09 + An analyst fcurert asses discloses te flowing ‘cash (restieta nthe aenount of 400,090 for a ‘ian expansion) sro. Lneestment nnd Accounts receivable less allowance of 30,000 + Other assets incu: Prepaid expenses P 47400 Plant and eaurpment less accumulates deprecation of 71,430,000, 4,130,000, ash surrender valut of ie neurance poiey 24,000 ‘harmonized bona scout $9,500 Notes recwvatie (stort term) 162/300 Good 252/000 Sond =< 446.200 Banoo + Curren obits inci: ‘Accounts payadi s10,¢00 «Was payable (due 20:3) 157/400, Income tx payabie 133,000 Shore premiums reserve 30.000 aaa ae TE + Longterm labities include ‘unearned revenue 489,500 Dhedenes payable 200/000 ‘8% banas payable (ave May 1, 2016) zs =~ ea39500 + Cal incuges Resained earnings P2,810,609 ‘Share capital, par vaise 10; authorised 700,0000 shares, 169,000 shares sued - 1,840,000 Pores) ‘he supplementary infrmation below sao povided. 12.00 May 1, 2011, the eampany issued at 93.4, 6750,000 of bonds to ance plant expansion. The long tory bond agreement proved for the annual payment of terest every ay 1" Thelensing plant was pledged os secur for the loan Use staightsine method for dienunt amorieavon 1. The Beokkeaaee made the fatloning mists: 1"ln 2008, the ending invantary was overstate by °283,000, The ending inventories fer 2010 ond 2017 were cerecty computed, 2. InzO11y accrued wages in the amount of 275,000 were omitted from the balance shect ana these expenses were ot chargoa onthe ncome-statement 3. In 2011, 8 gam ef 175,000 (net of tax) on the sale of erin plore assets wos credited dremty 10 retglned Somings You lesmed on January 28, 2012, price to completion of the to planes; the loss wil not be reimbursed by insurance The Dlant tas 8 caring amount of Pl 200,000 on the daze! fi Sgrati riers ‘questions: ‘Based on the above and the’ result of the audit, answer the felewing 6, ‘The aajustes current assets as of December 31, 2011 is 21,206,100 © #1,690,800 8 p4,s0s/600 6 91,583,200 7. Toe adjusted euten lables of Gecember 34,2011 5 3." 619,500 ec py65s, 500 8. 1130,000 @ Piy419,500 8. the adjusted noncurrent abilities as of December 31,2011 is 2907 400, &? 857,900 b pace'so0 & 61,584,000 9. ‘the adjusted equty as ot December 3, 2011 is a0 a5,600, 2 94,325,000 we a's39,000 & P4(478,000 10, 4Nnich af the folowing procedures would most tkely ve performed in connection with 9 eview of subsequent evens? n Tet of shipping cut of 1, Review of euaf bane statements Wovehing a subsequent payments of eecounts payable ‘5 Reasing of minates of matings of stockholders and board (of drectre up to the te of the aut report. PROBLEM No.3 ‘Okey Corporation asked you te review Me records and propare orracted! fnaneat statements. The books of accounts aren Ssrecinent with te folowing blanca shece ‘key Corpration| ‘Belence sheet Decerber 31,2012 sama Sg eee ‘Aadang Pus one sete ooh # 40,000 ‘Accounts recoivale a2'000 Notes reevabie 24,000, Inventories 200.000 ‘etal east Bes.000 ‘abies and Ouners’Eaudy Fecourts payabi= 16,000 Notes payable 32,000 Capital sack 30/000 Retained earings -2us.con Total abites and owners’ equty — EREH000 1 rewien of the company’s books inkicates that the flows fevors. and. omissions had ‘not en corected during Speable years : zoos 2009 BL ‘overstated P+ 56,000 P58,009 raing inventory ‘understated? 48,000 v2.00 repaid expense 7300 - Seon sc00 ‘se00 ‘acersed expense 1600 "san s00 | 400 Deenved income 4.000 e200 No dividends were declared during the yosrs 2008 to 2013 sna ‘0 adiustments were mace to retained corning, Ths compenys| ‘eels reported te folomng et income 2008- pg0,000-2010- _P52,000 boo: "xfoo 2013 "e0,000 quesions: Determine the achusted ameunts of tne following: (Disregard tas ‘mpicatons) a11. net income in 2008 3 99,200. P133,600 B pune,800 Pi7,s0o 12, net income (less) in 2008 a. (r62,000) (759,500) i (esa'a00) & pias.200 12. Net income (oss) in 2010 2 P00 fe. Peat0o. b paso0 8. (Pti,600) 14 Net ine (lass) io 2011 , ° (e76,000) © p295,200, ® Pige;400 196,000 15. Rotained earings as of December 31,2011 281,600 €.P202,000 8) past200 6 piar200 PROBLEM NO. 4 You ware asked by Beye Corporation to aud ts financial “Ratements forthe year ended Mafeh 31, 2011. As'a standard ‘ui procedure, you requested Bernsson to conlact Mr Oh, Pa, the company’s predecessor Suter. Beybs uncondtonaly ‘6 ts permission. You have leoed that Oh mated to ‘another County to. seek greener pastures =t the age of 68 Fortunately, he has slowed you to rewen Ns working papers, ‘wherein you have gathered tha following (on 3 Ape 2008 Beybe nae an inventory of cut seasoning timber ‘nhich fad cast P12 mation twa years ago. Dus to shortages of "his quay of timber ts value at 1 Age 2008 haa psen te P50 reson” wi be a further three years before this timber is sad o 9 manufacture of Nghe cass Tumlure. Ont Apr 2008 Beye ceneradinta.an arangement wth Caaces Bank sel te ter or PIS miton. “‘Beybe has an option to Buy bark the Umber st ‘Aas rons soe 28 time within the mest three years ata cost of PLS mition gies accumulated interest at 2% rer snnum above base tate, Ths wi be charged trom the date of the onginal sale. The bese rate for the period of the transactions fs Bie. this tidtuacton woe ecorded as 3 regular ales vaneation Based on your reveew of the records for 2011 you noted tet Beybe exercizad its option to buy back the timber ea 3: Mess 2011 and soldi on the same doy fora price of B25 ti se Durchase and sale were recorded reqhar tansnctions ‘quesriows: Based on the above and the result of your audt, answer the felling: (Dread income taxes) 6, The profit forthe year ended March 31, 2009 overstate by 2,000,000 ee 800,000 1,500,000 4 200/000 1 The profit forthe year ended Horch 24,2040 is overstated by 3.1650, 000 "91,296,000, © 61'500,000 a es 16, The profit for the year ended March 34, 2081 is uncerstted| hs 5 +3” 97,965,000 ©. P9,790,000 B. 6,150,000 4. 5,496,000 19. The retaines earings as of March 31, 2081 is mistated by 1 P8965,000 “<6. 99,930,000 “b pa.s00,000, a ee 20. Wien of ‘the follamog statements is corett regarding Substance ove" fom 8. Substonce over form san ingredient of relevance Bb. AF Ivormatien ts be reabe, the trsnsations ars ether vents should. be acenunted Yor and presenter at Accordance wih ther ga form,The subetance of transactions or ether events is always Consatent wh that which apzarene fom the kegel oe ontrve For 4. Aeconing to substance over fxm gelncible, the arty Unhich beors the rks ane rewards af ownership of any stat 5 the party whch fas to account fr the asset Fegorless of whethar ri We legal owner of the asset ot You were engaged to perform an aud of the accounts of the ‘Alen Corporation for the year ended December 31, 204%, and you observey te taking ofthe physieal inventory of the company Sn’ December 30, 2011. Only’ murchandis”shigoed by the cempny fo estar pt ond nclng Dacor 20,2011 Geterminad by shea ventory count hasbeen recorded the books bythe company’s contoler. No perpetual. inventory cords are Martane. Al sales are made on on FOB shipping Dont bass. You are to assume that all purehase invoices have ben corvecty recorded) The inventory was recorded through te fs sates meth ~The fotowing Hiss of sale invoces are entered in the sles books forte month of Dacember 2021 and lanuary 2012, respectively eceME® 2011 Sdics invoice Sales inveice ‘amount date Gost ate shpat 4) "Pisogo0 oe. 21—PLdo,000 Gee 31,2011 ©) “tooo ee. 31—"40}000 Nov. 03,2014 + 8 30,000 Dec.29 50/000 Dee. 30, 204t 200,000 Dee 31,120,000 Yan, 05" 2012 ©) $00,000 bec. 30.° 260/000 - Dee. 99, 2011 (Choned ‘ang tens sre dawany 2012, 1) F 300,000 pee3t ~~ B360,000" oe. 20, 2011 200/000 3an02—"instona Soe ag 3888 P) 600,000 ans 475,000 ee. Si, 2017 questions: Based on the sbove and the eesuitof your aust, Snail the 21, Sales forthe year ended December 31, 2011 is misstated by ‘2 P100,000 over 100,000 under 8. 200,000 over 4. 200,000 unger 22. Profit forthe year ended Decembr 21,2011 ig misstated by © 25.000 under *é. 380,000 uncer 23. Inventory as of December 31,2011 ig misstated by atte uncer "p209000 over 3. epson ovet & pes8a00 cer 24, Working canal apo Deemer 3, 2011 ts msstted oy 3 Bs ever ee 25000 wnt 3. Fussang over & aaeaao was 25.To ascertain whether vertvies incase inthe tose of fnaneat pation hyseay ext, a CPA wl omens "Test chents shipping ct praeoures 5. Oita contemation reuse neers. & Qoscrve physcal mvctory Counts &. Pert ‘an anaiyie renew of the relavonshe of the PROBLEM NO. 6 ‘The draft balance sheet of Prate Corporation as of Gecerier 3, 2014 ‘reported the ‘net sroperiy, plant ard coupe 2 75,270,000, Detais af he ama faiowe °° *Land at cost 1,000,000, ‘unin at cost 4,000,000, oss aaaumolbted depreciansa ‘it December 32,2010 909001 3,200,000 Punt ateaet 3,200,000, eo aeimate ceprecton ‘st December 31, 2.0000) 2.970.080 6.270.090 ne Following matters are etevant » The company pole foe all depreciation is that ts charged to ‘oat of sales anda fll year's charge le made inthe Year of scion reampletn and none mth Year of dispose, » Included in the sales revenue i 300,000 being tne sates "occas fan keh Bf pant that was sg on June 30. 2011 ve loot had “orignal cost 900,000 and had bees) 2384 10), asia 38172 Prot vertu, 2.008900 1500000 sos.900 ° ‘ 196.000 15,000 RE: raat 348.500, a) 2 431997) Nyanga) 1023500 2 Statin forcast nese Se | Neimeitment ie 2 nse me 2 teats sree bs Peemest esta) Pando! gu ‘ 1563000 reaino 341360 136000 ree rgo 1202000 taaint Miao gay gogaag 10D fess Hrs ourae Baaae SSSR tasins sriso Tasers Sant teeins aireo "ease Hat we os st0 1} NRE e400 15 EAs tony sae 208500 Dhcout on soles eevate 2.00 PROBLEM NO. 8-PaC Capron uaston 41-8 Gash 371 90-9400c00) ‘000 ‘cous cenane tea Nas ecovave te2s00 trent seis Ral pene ‘us | Telaleuront ots sae Cumton no 42 sont pane 10000 inane ae pope ‘esa00 Waa payase Peau nero pete 0750,0005 0 x 8000 Bren aye ron theses en is 00 Telalcurerkaies Tian Questor ne 43-2 . Nees pera ue 2:3) ‘stato Berea sano Destonbeneapnaicirsn:c0 9 poy yay 2Ph Aiton to 44-0 a \ ‘Share premium reserve 150,000 uae cnpe ted ‘ Cronus ee seen wanes iarzo0n i terest payable (P780 000 x 88% x 8/22), 440,000) i monet dace r S) S20)__2ass. am fo wanes fino g ‘Question No 45-0 PROBLEM NO. 10 - Okey Corparstion : a " A " te ae te mos amano at eds brea 000 “Mom “Eteeo “eoemo72heoo ‘verano ees Sos (c09 000 h Ed hones 2)Erdrgverioy dees ; ‘Ste <30co sino { oH roe 00 4 3) Prepas’ expense ee io Sam (509 See 509 ean ain ‘aac 2o08 20200 pn : ao aso noe 180) nao ion ‘coy be (a an 9) am pind 2008 re. Roe Br 20am id ‘Acsnted bales | A300 Te Soak as gee Ti 157A aa) 7 “Dont wsh 1 wor cai, wish you were beta. & ‘Dont wish for ewer problems, wih or mare sis Bont wis fries onalonges, wish or mare wisdom” Ei Snot