: Excel Professional Services, Inc. Management Firm of Professional Review and (isayae) Bacolod City (034) 4348214 * Cobu Ci (Mindanao) Cagayan de Oro City (08822) 728150: wwn.prie,com.oh CPA REVIEW ava0 City (082) 228-0048 OPEN FINAL PRE-BOARD EXAMINATIONS AUDITING PROBLEMS Exam Coverage | RPCPA Licensure Examination Syllabus ‘Exam Code _ AP.OpenFinPB.1009 {1:00PM to 4:00 PM No. of Questions 50 asororesmsusdoray FEwOr UATE eyo abay ‘ayuyjaput aq 09 yewapes 243 J0 Guy) ata siBpisucs AsInD -goa’g0g'zq 401 woReIOdso> 009 waxy yrewapesy = pasayzind ASIN ‘GOOL 'Z Alenuer uD (> ‘3w3 uo ponisDo1 sem quowised 6002 at 0% "FE Faquarea 3 NOO‘DOO'cTS 20 allen sie) 2 ym Guipung Aioaoey aya Aq paznevayenoo 5 POU ByL ‘alep sey) OF sola; LAM JOWIDGer soo “TE YseW Uo panieoas sem COG'008Td 10 stuawAed jed)outid lenuue jenbo jo assy a4 “2202104 000'900'6d au) 40) 2I0U SET 4#04-anyj @ poubis pus jualuAed umop g00'0d0"Ed @ apRW. 219884 “000'000'zTd 404 “ZO0T ‘TE YoueW! UO AUedWOD aiqeas 9] Burpyng AscxDe5 @ Jo aje5 242 wou pontosas uoNeiepIsueD 319 49 soupjeg au Squaserdas aigenjanas yeNU09 juauMersU! aus (q josn oui aq 03 pat OS® sem LDU ‘s!89K BEY sem a, au) ‘elep 38m vO ‘s00z 'T saquiedss uo ggQ'St‘ed Jo} Ausduioy soquenut Woy poseyoind sem quored aul (e Smol0s Se 21M GOOZ 10) uOKEUUO;LY Z9yYO PUe suONDESUEL) yWeASION 000‘002'2 —Siqenlozay ae2QU09 quauujersuT oao'ose'za yeu usieg Sumayjos ayy sue gogz ‘TE 4oquis0ed 1e uoReiodieg Asing 40 saouB|eq junos3e ay) BUoWY TON WaTg0ud OMACOD “Atue Z “ON THONSd Bsn CVIWANT 72ys semsue voNetIWeXa inf JapuaL jjjm sounsess “OBMOTY SBuNSvYa ON AMIS “pepinosd ays semsue S42 UO Wray UDED 10) FaMSUe BUC AjuO *eW “suONSND Bulaoyos SUR JO YES 40) sOMSUE JSeq By) IBS ISNOTLONALSNI ouas swaiqoss SunpnyProblems SET using Pratiems ser 46, The adjusted balance of Inventory as of December 31, 2009 )}On May 1, 2008, Gutsy sold the patent to Simple Company in is exchange for 2 P5,000,000 non-interest bearing note due on 2, 1,673,000 <. P1,672,000 May 1, 2012, There was no established exchange price for the b. P1,704,000 3. P1,670,000 patent, and the note had no ready market. The prevailing rate pee eea aie eo of Interest for 3 note of this type at May 1, 2009 was 14%6, RIE A eater cere tered eee present value of 1 for three periods at 14% is 0.675. The Sa) pete sigh collection of the note receivable from Simple is reasonably b. 1,327,000 , P1,330,000 assured. fae oe fae 2) On July 1, 2008, Gutsy paid 18,800,000 for 750,000 ordinary Sansa rete arene i vedneer st becempetiats shares of Pure Corporation, which represented a 25% 78,110,00 tue of all of Pure's identitia esac ee peciaen assets net ities equais their carrying amount of iiss Sheen 64,000,000. The market price of Pure’s ordinary share on 49. To ascertain whether inventories included in the balance December 31, 2009 was P26.00 per share. sheet physicaily exist, 2 CPA will ordinarity: ) Pure é 2, Obtain confirmation of pledged inventories, Cae eeerre ee one One Pale eee b, Observe physical inventory counts. Dividends €. Test client’s shipping cutoff procedures. Nistincome pershare @. Perform an analytic review of the relationship of the Six months ended 6/30/08 P5,760,000 None inventory balance to recent sales. Six months ended 12/31/09 7,040,000 2.00, 50. In a manufacturing company, which one of the following aut Dividend was paid on November 30, 2008, Procedures Would give the least assurance of the valuation of inventory at the ausit date? QUESTIONS: 2+ Obtaining confmation of inventories pledged under foan sd on the above and the result of your audit, compute for the b, Testing the computation of standard overhead rates. ite Examining paid vendors’ invoices 4. Goin on sale of patent &. Reviewing direct labor rates. 2. 2,620,000 P. 925,000 b. P-'995,000 a. 4,078,125 = end of examination - i Keep tie quesuoarane 2 P 760,500 4,233,000 pee eee b. P1,251,000 d. 4,075,500 Thank you for taking the PRTC Open Pre-Board Examinations! © Fe BIE ae. 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Sui Ui voRDedsui Suipuad pjau pue siewoysno Aq powinga: sioc, “Pp ‘6002 ‘OF s@quIsd9q UC SuNeiC 104 sossadoud apisino We 0} ues SOM OOD'DE BUNSOD AsoqUARL! sSaD0I0 Ul >OM “> = auas sultgaig Buon ‘Suipen 404 pjay ase soseus aus -g9¢‘cq Jo soa Smid OSa @ 881035 va JO ares Q90'9 IUBNOG - T saquioneq « #8 89) $881 Teg @ “d209 yO 40 saveys oo0'05 p10 - sSuonoesuen sanunses Suimojos auf payaidulod pid: "600% UI “2902 UI paseyound Ueaq pey 006009: —ag0'006't ~—aoo’aoz' vd 30 sazzys Aseuipi0 goo‘GT S00%00%'te o00'00S'ts G00'009'Td “4109 19 Jo soueys WOORTTETET BOORTTEReT way ‘AteUID10 9000'S 8002 “Te ‘ales 404 Biqzjene Aueduiod pidsauy ZON WaTgoNa ° oos'szo’ets -¢ 3 ooo'o0s'eta -e 6002 ‘TE sequieaag jo Se uonevodion aing us uaunsane) aug Jo qUNOwle BulAueD aus“ 00s'éy8'ed “p vo0'06s'ed “6 Ooo'sce’ed “3 000'000'sd “e 8002 ‘TE #oquieoaa Jo Se sled 40 ales wow sigeniane1 ajou aug Jo yUNOWE BUIALIED “p o00'o0r'td “p o90'009es °g o00'u8'te “> 000'00%'ss “e 002 ‘Te tequissag #0 SP Bigentsoe: spexuOD qUBKHersU) 219 JO UCRUOE JUDLIMDLON “¢ cuas ‘swa}goig Bompay‘Austideg Peebles sETO 42. Net accounts receivable a. P630,000 &. P767,800 b. p782,800 6. P754,000 43, Trade and other receivables, net 2. P797,800 . P660,000 b. PB12\800 . P784,000 44, Inventory a. P730,000 482,000 b. P340,000 4. 530,000 45, Currents assets a. P2,361,000 &. P2,485,000 b. 2,498,800 6. 2,513,800, PROBLEM NO. 10 Audacious Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2009: Inventory at December 31, 2009 (based on physical count on December 31, 2009) 1,520,000 Accounts payable at December 31, 2009 1,200,000 Net sales (sales lass sales returns) 8,150,000 Additional informati 5) a. Included in the physical count were tools billed to a customer FOB shipping point on December 21, 2009. These tools had 2 cost of P31,000 and were billed at 40,000. The shipment was on Audacious’ loading dock waiting to be picked up by the common carrier. b, Goods were in transit from a vendor to Audacious on December 32, 2009. The invoice cost was P71,000, and the goods were shipped FOB shipping point on December 29, 2009, ‘Austtng Proviams ser ‘The fair values of the equity securities appeared as follows on December 31, 2008: 100,000 shares of PA 2,000,000 6,000 shares of BA Stores 255,000 QUESTIONS. Based on the above and the result of your audit, answer the following: 6. What amount should Intresid report as net. unrealized gainfloss at December 31, 2008, in accumulated other comprehensive income in shareholders’ eq a. 400,000 c. P300,000 b. 100,000 dp 0 7. How much is the gain or loss on sale of OK Corp. shares on March 1, 20097 a. P 65,000 loss cc. 935,000 gain, b. P135,000 gain 6. P50,000 loss 8. What amount should Intrepid report as net unrealized gainjioss at December 31, 2009, in accumulated other comprehensive Income in shareholders’ equity? a. 300,000 . P100,000 b. 249,500 ap 0 9. How much sho repid report as unreaiized loss in the income statement relate: ended December 31, 20097 these investments for the year 2. P 50,500 45,000 5. 9130,000 ap oo 10. In auditing investments for proper valuation, the auditor hould do ail but the ng off the client's purchases and sales of securities by tracing to brokers" advices and canceled checks. fag iciae aaah = z APO pentinPETEOS aaa an accaE AB GpenFaPBTOOSsorsausvedoy. 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Aq TELE UE 3500 aledut0D “> uss Swaigo.g CampsAang Problems sero, PROBLEM NO. 9 ledger tris! balance of Resolute Corporation includes ing balance sheet accounts at December 31, 2009: cash P1,056,000 Accounts receivable 4,220,000 Inventory ‘Trading securities Available for sale investments Prepaid insurance Deferred tax asset Bank overdraft Additional information: cash + The sales book was ieft open up to January 5, 2010, and cash sales totaling P150,000 were considered December, + Checks of 293,000 in payment of liabilities were prepared re December 31, 2009, recorded in the books, but not dor delivered to payees, ® Post-dated checks totaling P78,000 are being held by the Cashier as aart of Cash. The post-dated checks are eventu. © Customer’ Bank, “s experience shows that ed red with but returned by inst @ short-term bank joan. The compensating balance is legally restricted as to withdrawal Accounts receivable ‘The accounts receivable consists of the following Trade accounts receivable P 650,000 wance for uncol accounts (20,000) sm against shioper for goods lost in transit 30,000 Austting Probleme ser 12. Ignoring income taxi accounted for the transa Feisty Corporation erroneously as an oper fer 2009 wis! be overstated by a. PA78. cP 678 b. P5523 d. 71,128 13. The amo ported by Weary Corporation under current ity under finance tease 2s of 31 December 2009 is 2. P5208) P3709 b. P5438 d. P6,223 © deprecia mount to be recognized by Weary rporation for the year ended 31 December 2008 is 3. 5,973 73,932 b. P5,251 6 6,291 15. Ignoring income taxes, if Weary Corporation erroneously accounted for the transaction as an operating lease, its profit, For 2009 will be overstated by a. P4513 © P4193 b. P1,302 6. P 982 PROBLEM NO. 4 ‘The accounting profit before tax for the year ended Oecember 31, 2009 for Doughty Corporation amounted to 175,900 and terest income 11,000 service leave expense 7,000 Doubtful debts expense 4,200 Depreciation ~ plant (15% p.a.) 33,000 Rent expense 22,800 Entertainment expense (non-deductible) 3,300 Pipe OE aawiaceman 7 2 FR GpeaFINPBTEOS Raven aa a APoperFiaPSIO.0Scov'cts ovsizte “4 009.0kd ‘> 000'p%d “2 rosie Se posing et OvO0'TTd “P Ove'0zZ ‘9 oooloos'ora “P con'o0r'tta “@ oe'sta suey aig eg 90000S’0Td > 000’00S‘Tig ‘e BOOZ ‘TE JSquiadag Jo $e SiBsse [e205 “Oy ooe’ese “P oss'zsa “9 coo'cos'né “p soo'sov'sd “a o's car's = oo0'00z'td > 000'CS2'6d “e Z 6002 ‘TE Jequiarad Jo se ALO WeALT “GE ‘6002 4quU : on mapas 000'OPZ'Td “Pp 000"088d “9 000'0Pr'td “> O00‘O%Zd “@ ISNOLLSINO 6002 ‘TE seqwared Jo se soue|eq Yse> “ae ook ssonaie ooo'ogs'se “P @ o00'ars'se > ® 6002 Suyinp sasuadxs Suyeiado jo quSWARd "Ze 000'008 ¢ “P ooo‘eau’ze -¢ 909'003'td 2 200'000'td “2 ywauudinba mau ayp jo 3809 ‘uy 40 sandwioo ‘3¢pne Nod Jo 2INSe2 aif pue Bnoge ay UO pSseg ‘SNOLLSINO I "Tg Jo suIOUy JEL @ paMoUS 6002 ‘Te 4equaseg Gupus suogeredo sssuisng voYDaD) SaUeHeA use0 Ui pled azam quswamnbs seu jo eseypind Suipnjaur ‘sasuadxs Suneiedo iy oe ee ee eee Bu} uF peyeDardep s] sumo 24; Aq DOxSOAt jusuidinbo: 0138 ‘eugeue Sugony wouy premio} paluseD Sasso; xe} UI go0'GTd Sey AUedUICD ayL ‘9@0E 5} Ses xe1 UL ‘Oui UBIEAS “e'd %OT St Weld 10) a121 UONBDALdap xer ayL = uopeuuosu jeuonjpoy ore, g Aah coo'Ts —cn0'ng anes] asinses-bi xeq pawajoqh 10} UoIsiAdse} 909'cz o0z'TL hed SUNOIIY ose’os xe pauajog {c00's9) (o00’66) queid - uogepaidep payeinuaasy p00’0zz = 000’0zz o0b'e 008’z ques piedald: 000'T aiqenaze: ooe'ss — onT'Z9 (aoz'e ) (o00’s } sagap injqnop 103 20 cos'se 00's ‘aigenanes oos'e 4 9006 a ‘8007 ud pue syasse Buymoyos ‘ul paulewuos 600z ‘TE Jequisvag 72 yeas soURIeq Yeu 4; auas swargasy Supny‘Auditing Proems setD Question Based on the foregoing, compute the December 31, 2009: 31. Cost of goods sci llowing for the year ended 2. P307,000 ©. 299,000 b. 309,000 a. 293,000 32, Depreciation expense 2 00 c. ?53,000 b. 00 4. P78,400 33. Total operating expenses 3, P282,400 34. Loss on retirement of bonds payable a. P 3,000 c. 23,000 b. 20,000 a P98 35. Net income 2. P12,800 c. P40,800 b. 54,800 G. P68,800 PROBLEM NO. 8 ‘Your audit of Valiant’s Kitchen, a restaurant established on July 1, 2008, disclosed that the owner started with an investment totaling PS million, composed of P3 milion in cash from his personal funds and P2_million worth of equipment, Valiant's Kizchen also Borrowed PS million from Gallant Bank, During the first six months of operations revenue totsled P21 n, of wh Purchases for remained unpaid. The restaurant operations were made at 50% above cost. The owner purchased @ new equipment on October 1, 2009, end this was depreciated at P80,000, based on @ five- year lif with a residusi value of 20% of its cost, The other ‘Austing Promiems SeTD 419. Deferred tax expense 2 P 180 . P36,300 b. P6,780 a. P38,580 20. Interperiod tax allocation results In 2 deferred tax iat from a. an income item partially recognized for financial purposes but fully recognized for tax purposes in any one year. b, the amount of deferred tax consequences attributed to temporary differences that result in net deductible amounts ia future years. can income item fully recognized for tax and financi purposes in any one year. the amount of deferred tax consequences att temporary differences that result in net tax in future years. ty ibuted to amounts PROBLEM NO. 5 You were able to gather the following Information in connection with your audit of the shareholders’ equity section of the statement of financial position of Plucky, Inc, The company 's 2 producer of beauty products. As of December 33, 2008, the shareholders’ equity of the company is presented below: Cumulative preference shares (P15 per value; 50,000 shares authorized, 8,000 shares issued and outstanding) P 99,000 ‘Ordinary shares (P10 par value; 500,900 shares authorized, 165,000 shares issued and eutstanding) 4,650,000 Retained earnings 933,000 72,873,900 Plucky’s equity transactions during 2009 were as follows: a, On January 31, 42,000 preference shares were issued in exchange for land with an appraised value of P150,000. Six Baga sree a AP. Spaarin PBI OT aeien mane FPO RIOISSee eee ce ee osz'té ¢ “PB OSZ"9zEd > ‘000'Zzd Jo juNCWe GujAiseo @ pue goo’std ae i: ‘SeseysINd Au0jUaAU! 0} dIe/94 igeAed squnaa%e | uoveuozul jeuaR!pe BuIMoljoy Dus s9pISUO> we" 204 auf Jo pua arp 3e yseD oor’ 404 243 Jo Buluurbaq axa 38 ys) 009d seo 8se0.0u) 19H {000"S8) saniAnIe Burueuy ui pesn yse> rn) Wore (000'E2)a (ooe‘ze) ane Sunsanuy ul pasn yseo JN (e00rGs) quauidiaba: pue uejd ‘Ayedord yo aseyaung oue'ee 4 quauidinbs: pur "ued “Ayadoid Jo aj25 Sajingae Buljsonu! Woy si o0e'86 ¢ 59) Buneiado Aq papinod ssuadxe xey euiODuT Woes BOS'ES ooo't asuadxe ysauswl o00‘0st asuadxa sa6e%n 200'20r sasuadxe (218099 900‘00ee seseypind AsousAe] Hoy SqUBUIANd YSe3 o0e'sa96 s1@ui0ysn> W045 payD9}400 USED -sonjanae Bunessda wow smo\ YSeD 6002 ‘Te sqwo02q papuy 129A 33 104 SMO} YSED Jo WOWO3EIS Aueduioy Sued uss sueraoia Surepry jeude> szeys aoua.9yerg “TZ 6007 ‘TE Jaqwared 40 se Buimojoy ay) Sulwuayep ‘ypne Inod Jo NSA! tA PUB anoge aun UO paseg ‘SNOLISSND ‘000'S2Ed Se G00 4BEA aU 50} aYOUd 5,ANId “Ly OT02 ‘St Asenuer uo aiqeAed pue “gr zaquisoag uo povepep som sareys AreuIpio au} UO az2ys 19d OG'Td Jo DUBPIAID USED Y “5 ‘Si Jaquianon uo pied pue ‘Sy seqo}90 uo sazeys sousvayaid 31f] UO paie|sep Sem s1eys 18d Zq JO PUBDINID USED ¥ “J ‘s12ys sed Btg 3 Se1eYs suBIeya1d J00'9 pales MxONIg "TE JAqUIRIG UO "> O1az ‘Te Auenuer aicjaq s0 uo souejeg eu Aed 03 paaube seeing “pied ueeq pey ons/z6z TE sBquISDaG Ty “pled AjIny sj aoUd aseiaind ayy UEYM paNss} 28g 02 aueys sed szq 1 SBIeYS Panssiun AjsPo!AsiC Q00'ST 40 2128 84) 10} SSBAND AM parseIUCD AMIE ‘Oz s9qWIEIG UO “P. (Casazequr sty syeuney 01 pappsp quaweBeuew sonia pue ABIES. ssoursnq s,Ajanig pasoddo Aquajoin uaaeia) “saieys Aunseaay $@ pioy ag 0} sie saieus ay] “BIRys 19d 774 3e SSLEYS OSd'9 s,weDIG J8ploueIeYS JUEPISSIP pasepind Wenig ‘yT 199W9I2q LO ~aueys sad Sz 38 UBABI “sy 0} PIOS dom saseys AreuIpIO OS2’9 “pt Azenagas UO *g -bieys ted pre 20) ,29qUN0D at sano, paBuey>xs 1am saseys sousiajaid s,Opnig Jo Seseus og'T oBe sypuoU uss suaqgera Busiony‘Aasting Problems sero. they are expected to be reslized within twelve montns after the reporting period, PROBLEM NO. 7 The following Jal statements are for Daring Company. Daring Company Comparative Statement of Financial Position December 31, 2009 and 2008 ~—2008____2098_ Assets Cash P 4,000 P 3,400 Accounts receivable 25,000 18,000 Inventory 34,000 Prepaid general expenses 5,000 Property, plant, and equipment 320,000 Accumulated depreciation (128,900) Patent 900, 40,000. 302,200 291,500. P 25,000 P 22,000 Wages Payable 32,000 19/300 Interest Payable 2,800 4,000, Dividends Payable 24,000 - me taxes Payable 1,600 4,200 Bonds Payable 100,000 120,000 Share cay 50,000 50,000 Retained 96,800 84/000 Total Liabilities and Equity P302,200 291,500. ‘Austing Prooioms sero 23, Total retained earnings 2. P988,500 c. 4,006,500 b. P824,250 4. 1,018,500 24. Total shareholders’ equity a. 93,085,500 c. 73,198,000 ©. 3,018,000 6. P3,168,000 25. When @ client company does not maintain its own shares records, the auditor most likely wi 'spect the shares book at year-end and accounting for all certificate numbers. b. Obtain written confirmat registrar concerning yn from the transfer agent and ie number of shares issued and tion 2s to shares outstanding at year-end the appropriate state official PROBLEM NO. 6 The general ledger summarized trial balance of Indomitable Corporation, @ manufacturing company, includes the following accounts at December 31, 2009: Debit redlt Accumulated depreciation - bui P 320,000 Accumulated depreciation - leased assets 310,000 Accumulated depreci and equipment 3,726,000 Allowance for doubtful debts 89,000, 2,235,000 overdrafts 350,000 ings, at cost 1,030,000 Cash 175,000 Current tax payable 452,000 Bae Wo? aaarae ae a AP Ope APR DE Page oR ame ca se AP SpenFnPaIO.oS gsororasusesdoray HOMESTEEAAR revo ates eum sjuo 22> Buperado jeuuou ayy Jo ped se pazijeas 40 pauunsucs “pjos aie Jey: stesse spnjsu; syosse wauN “p pue voneuassid® ay ooo'st6‘ed “2 o00'sor'rd “¢ Teed 2 ooo'ETe'ed “e 5} sanyiqey quauunducu \e01 “62 ooo'ess’ed “P 900'se8'ed “9 o0o'Tz6'e4 “> ‘eag'ed -e quaLIND IeIO| ‘gz o00'9s8's¢ “p on0’ses'sd “9 o90'réa'ad "> ooo'rrs'sd “e 5] stasse yuasunou0U \eyo1 “Zz a00'se0'sd -P ooo'ess’ed “9 coe'rzo’rd > 000'6t0’rs “© 51 syEsse 1UBIN [e301 “92 Buy 1@ 4NOA Jo yINSa BLY pe Bnoge aur LO peseg SHOLLSINO “1294 a80 puoKaq paxunou) aq 2 pazewnse ooo'oze sopmpus AuesieM 30) vorsinase Cy sse0h U0 une paneidivos a 03 papuawu s) Buunionasos pauUeG ou Co am aigeded 000'ZETe SBpNjaU syyeuEq qUaLUAgICWIe 40; LOISIAOIY (P cuss swajoig Buneny sororaainsuedory REUOONEE ez yozt a0ng ea BuO uiNRiM BIqeKeda1 QOO'SZTd APAIoUI SeRIIGeH aSee7 CO “sB2A uO uILRIM Bjgededau st SasMUAGaA 219 30 O00'OEd (4 “Bah uo puodag aiqeAedai je sie sued} ayo pur sued; yueg (e uOHeULOSU [eUCRIPPY COUTEYZt4_vov'? eT sseuS01d ul 0m 000’eb2't sioagap anes 000'c18't s10}po.9 apes, o00'eee sioagap Aipuns, sten.n3e pue suo3ipai> Apuns 200 oa © jeudeo o1eus sSunuszo paujeyay| 000'06" uoyeus mex oon'ee Aquetiens 403 UOIsIAdig ooo'ery Sujimonarsas 20} uoIsiaog o00'scz s1yausg quawkojdusa 40) uoisiagsg o00'tot stuswiAedara o00'sce"e jusuidinbo pue 3L8i4 ooo'orr on0’ses o00'sce ooo’ose 00°18 aniasa, uonenjena: Sue} o00'osz uonenien ye "pucy on0'sz BAiaS81 uonen}eAo! 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