INES. 7 POLYTECHNIC UNIVERSITY OF THE PHILII College of Accountancy & Finance 4th Evaluation Examn| Mi ‘ACO 4103 - AUDITING PROBLEMS Instruction: Mark properly the letter of the best onswer on the scannable onswer sheet. Good luck! Abellera Comy Shown below ste bank reconciltion for Abellera Company for November 2017. Balance per bank, November 30,2017 300,000 ‘Add: Deposits in ansit 48,000 Tetal 7348,000 Less: Outstanding checks P56,000 " Bank credit recorded in err 20.000 _76,000 Balance per Books, November 30, 2017 roo The bank statement for December 2017 contains the following data Total deposits 220,000 Total charges, including an NSF check of P16,000 and a 192,000 service charge of P800 All outstanding checks on November 30, 2017, including the bank credit, were cleared in the bank in ‘December 2017, There were outstanding checks of PE0,000 and deposits intrensit of P76,000 on December 31, 2017. Based on the above information and the audit resuit, answer the following: 11, Hew much is the recelpts per books in December 2017? 2. P296,000 b. 248,000 < 228,000 d, 220,000 2. How much isthe disbursements per books in December 2017? a. P192,000 'b.P179,200 159,200 4. 196,000 3. How much isthe cash balance per books on December 33, 2037? 3. 360,800 ‘6. P300,000 & P324,000 4. 340,800 14. How much is the adjusted cash in bank as of December 31, 2017? a, P392,000 b. 283,200 344,000 4. 324,000 Austria Corporation «Gn January 1, 2015, Austria Corporation issued a 3-yer, 8,000, P1,000 convertible bonds at 110. Interests 1on rate of 12% every December 31. Eack bond is convertible at the ‘tobe paid annually atthe stated coup holders option into 30, P25 par value ordinary shares at anytime up to maturity. Qn the date of issuance prevaling market interest rate for similar debt without the conversion privilege was 9%, On the same date, ‘market price of one ordinary share was P30. Considering the above data, answer the following: How much is the equity component of the convertible debt? ‘a. P800,000 b, P422,335 . P192,352 a Po How much js the resulting bonds payable carrying value as of December 31, 20157 8.422.396. P8,607,648 © ¢.P,220,346 = d._ 8,000,000 7, assuming that the convertible bonds were converted on January 1, 2017,how much the net increase in ‘Share premium/additionalpald-in capital from the equity conversion? 2. 72220346 b, P2,412698 «= «214,688. PO ‘Assuming thatthe convertible bonds were retired at 98 on January 1, 2017 when the prevaling quoted valve aaaa yore at 26, how much the gain or los tobe recognized inthe Income statement forthe d, 540,346 retirement? a, P380,346 b. P572,698 &P160,0000 4 10, 11 2, 3B. ING PROBLE! Angeles Company : sition showed the following balances On December 31, 2016, Angeles Company’ statement of financial position. related tots securities accounts. FV Through Pa 1,477,500 FY Through oci 1,180,000 lero eel 2a Bond 0.00 Unrealized Gain Fvocl sata ing securities Angeles Company's securities portfli on December 31,2016 was made up ofthe followin Security Class Cost ee 10,000 shares Filex Corp. stock FPBL_-—«7750,000-——P762,500 8,000 shares Aepo, Inc. stock FvPal ‘$50,000 528,250 10% Zuric bonds - interest payable Jan. 4 and July 1 Fvpat 250,000 ue 10,000 shares SMDM, Inc. stock FVOCI_ ‘590,000 630,000 20,000 shares JGabs, Inc. stock Fvoc! 490,000 550,000 Aan. Received interest on the Zure bonds. larch 1 Purchased 3,000 shares additional shres of Fllex Corp. stock for 229,500, classified as FVPAL, April 15. Sold 4,000 shares of the Aepo, Inc. stock for P69 per share. May 4 Sold 4,000 shares of the SMDM, Inc. stock for P62 per share. July 1 Received interest on the Zuric bonds. Oct. 30 Parchased 15,000 shares of BPMP Co. stock fo P832,500 cased as The market values ofthe stocks and bonds on December 31, 2017 areas follows: Filex Corp. stock P76.60 per share ‘Aepo, nc. stock 68.50 per share BPMP Co. stack 95.25 pershare ‘SMOM, Inc. stock £61.00 per share 4Gabs, Inc. stock 27.00 pet share Zuric bonds 205,550 Based on the above data and the result of your audit, determine the following: Gain oF loss on sale of 4,000 Aepo, Inc. shares on April 15, 2017 was 2. P1,000gzin ob. PAI87Sloss ce. PI,000 loss. d._PAI.875 gain Gain or loss on sale of 4,000 SMDM, Inc shares on May 4, 2017 was a. P8,000gain —b, P12,000gain —<. P4,000gain dP Carrying amount of FVP&AL as of December 31, 2017 was a. 2,287,800 —b P2,337,000 ©. P2,297,400 © d._ 2,304,100 Carrying amaount of FVOC! as of December 31, 2017 was a. P84d,000 b. 906,000 <. P944,000 4. 806,000 ‘What amount of unrealized gain or loss should be shown as component of shareholders’ equity as of December 31, 2017? a P22,000loss —b.PG62,000 gain c.-P112,000loss. dd. P78,000gainvamcsomamg 2 The bal lance sheet 2016: OF Acojedo ‘poration ee ‘ation reported the following long tern tecelvables ax of December 3, Notes recevay ots receivabe om Ince tabi trom ome 4,500,000 Inconnestion wth our sean 1.200000 formation pea su YU were seo ahr fawn anatons ing2017 a other epee neat company len tem eas The ae eta om thea Bese ot 12pm. treat artlin 3 anna instars ot 2.5000 pints on eateat balance every Ap. Tena pnp andere amen 5. {ase on ap. 20h Pe ee resale mfr hed Once 3206 einer mum, and is due on December 31,2019. The 2017 intrest as «___ etiedon scenber3,2017 he corporation old place of equipment o RAM Company on Api 12017 in exchange or 50,20 non eet boing ee don 22018 e note had no ready markt, and there was no established exchange pce forthe equipment. The prevaling interest rate forthe note ofthis type at Apri 1, 2017 was 12%. The present value factor of 1 oF two prtds at 12K Is 0.797 while the present valve fctr of ordinary annuity of fr two periods at 12%is 1.600 A tact of land was sod by the corporation to MHL Company ony 3, 2017 for 3,000,000 under an installment sale contrac. MHL signed ayer, 1% note for ?2,100,000 on luly 3, 2037 n ain to the down payment of 900,000. The equsl annual payments of principal and intrest onthe note will be P576,875 payable on uly, 2018, 2018, 2020 and 2021. The land has Sr estblshed cash pic of P3,00,000, nds ost tothe corporation was 2,250,000. The collection ofthe installments on thls note sreasonably assured. Based on the above and the result of your audit, answer the following: ow much isthe total current portion of long-term notes receivable as of December 31, 20177 2. P1500,000 ib, PL945,875—c. P2ATBSTS =. POS ich isthe total nancurrent notes receivable as of December 32, 20177 d, p4,832,325, 14, 15, How mu a. 6,778,200 —-b. P5,278,200 cP, 875,363 416, Whats the correct accrued interest receivable as of December 31, 2017? a, P428,538 b, P505,500 270,000 4, 385,500 117, What isthe correct interest income forthe year 2017? b. P756,000 c. P683,538 4. 640,500 3. PB18,538‘AGCO.4103 AUDITING PROBLEMS —____— 18, 19, 20. 2 2. 23, Mac, 1 ventory Ne tae on Aguilar Corporation the arnou Fabia Conpeebonequested your aaance neering Re arwar sone esa omer a eno he cee Te ig ‘The last physical count was done on December 3 2016 ducing whic ime tt cf inventory amounted to P612.500 1. ‘Aecoums payable were P84,000on December 31, 7016 nd P,008/00 September 15,2017 54,740,000, Total payments to suppliers rom January 1 to dote a fhe amounted 19 PT ‘Asals which wos aypronmtey 129 ocx were mde on cout and wie Tecewable wore P1041, 750 at December 31,2016 and P747,750a80f date ol he Cottons of eeabls were P84 70 onus 203710 sept 1,201 1 The chentscrtaned hl ne remoting saved vents ving as At 500,000 damaged by fre con be volt thei nt raza vl which was P10} 0 ‘ile ational inventories costing P6090 were at damaged by he ire and can Sold at normal profit margin. Based on the above data and the result ofthe ual, answer the following: Total purchases for the period January 1 to September 1 las tember 15,2017. 4,755,000», P4,740,000—&,PA,S75,000 © d._—PA, 905,000 The estimated cost of sales from January 10 September 15,2017. b P5,286,750 4912.92 dS 13,750 5,239,800 ‘The total cost of inventories a of September 15, 2017 before the fe a. 1,527,700. PH,G05,188 —€.PA,277,700 «(P85 168 The total inventory fire lss on September 15, 2017, a, 894,188 b. P1,176,200 cP 188 4. 566,700 the company purchases patents from time Antonio Corporation “Antonio Corporation has its own research department. However, {otime, The following isa summary of transactions Involving patents now owned by the company: During 2011 and 2012, Antonio Corporation spent a total of P4S9,000 in developing # new process that was patented (Patent X) on Apil 1, 2013; adeltiona fagal and other casts of P50,000 were incurred. ‘patent (Patent ¥) developed by Henry Dee, ‘on December 1, 2014, on which date It had an During 2013, 2014, and 2015, research and developm additional patents resulted from these activites. [A patent infringement sult brought bythe company against» competitor because ofthe acnufocture o artis infringing on Patent ¥ was successfully prosecuted at cost of 742,600. & decision nthe case was rendered in une 2015. On uly 1, 2016, Patent Z was purchase for 172,800. This patent had 16 ears torn During 2017, Antonio Corporation expended P180,000 on patent development aoe tne company ist undecided ast how the patent, approved by the Burenu or Patents, will generate probable future economic benefits. the lega life ofeach patent is also its useful life, Based onthe 2 ‘an inventor, was purchased for 187,500 estimated useful feof 12 1/2 years. nt activities cost P510,000. No ove and the result of your Assume that: ‘audit, answer the following: What is Patent X's carrying value on December 31, 2017? a, PAQTAZS b. 120,88 . PA0,000 4. P3825 -nonzation expense to be reported on Antonio Corporation's statement of What isthe total patent 21 comprehensive Income forthe year ended December 31,2017? a. P28,741 bb. P37,300 28,300 4, 74,325S098: AUOTING PRoML, a tig Almenx In. ‘Information ertainin below: 18 0 Almencion on Corporation's property, plant and equipment for 2017 s presented Aecoun * alonces as at January, 2017 Land oebie cede big 150.00 Accumuls seen Accumulated Depreciation Bulg iat 263,100 fe unery & Equipment 900,000 rcumulat Secumlated Depreciation Mach & Eau asa cre ‘quipment 115,000 : ee Depreciation-Office Equipment " 84,600 Seoreciten methods edad et te: ildng 150% declining balance 25 years Machinery & Equipment straight line to years ayers Ene Equipment ‘sum of the years’ digits ransactions during 2014 and other information: ‘= On January 1, 2017, Almencion Corporation traded-in its with a cost of P9,000 and a book value of P2,700 for a new of ‘price of P12,000. Almencion Corporation paid P10,000 cash. 2012 was destroyed by ‘On April 1, 2017, a machine purchased for P23,000 on April 1, 2 fire. Almencion Corporation recovered P25,500 from its insurance company: (On July 1, 2017, machinery and equipment were purchased ata total invoice cos of 'P280,000. Additional cost of PS,000 for feight and P25,000 for Installation were ‘incurred. ‘Aimencion Corporation estimated thatthe office equipment ‘comprising the id have been depreciated ata total amount of 115,000 balance at January 1, 2017 wou! 18,000 for the year ended December 31, 2017. wo.year old office equipment fice equipment with acash Considering the above data andthe result of audit, answer the Following: 124. How much is the gain or loss on the trade-in transaction? 2. P700gain b. 2.700405 POD loss 4, PO 25. How much isthe gain or loss on machine destroyed by fre? tewnoDIbss b PuLSOOless «© P4000geN dP 26. whats te accumulated deprecation of machinery and equment a of December 34,2017? b, 353,775 338,275 6. P342,275 2. P337,700 27. Whats te total depreciation expense fr the year 2017? 176,189 4, 180,989 2, 7164914 b, P199,72728. 29. 30. 31. Aberca Company coaaauecton with your audit ofthe Aberca Company, You were asked to prepare comparative ta Hom ne SOmERRY' inception tothe present. The following were gathered during your audit * Qetc2 Companys charter became effective on January 2, 2013, when 100,000, P10 par were idinay shares and 50,000, 5% curative, nonparteipating preference sharer wore cold rhe ordinary shares were soldat P12 per share and the preference shares MIE £014 at its par value of P100 per shore atecs COMPANY was unable to pay preference vided at the end of eit year. The of prefect Preference shares agreed to accept 2 ordinary shore fon very 20 aera Of preference shares owned in Sischarge of the preference share dividends ‘due on December 31, 2013. The shares were Issued on January 2, 2014. The fair value was P30 Ber share for ordinary at date of tang, * Aberca Company acquired all outstanding shares of. Aldrin Corporation on May 1, 2015 Aes Pane for 50,000 ordinary shores ‘of Aberca Company. * TREES COMPANY splits the ordinary shina Shee on January 1, 2016, and 2for 1 on January 1, 2027, *° Aberca Company offered to convert 20% of reference shares to: ‘ordinary shares on the basis of 2 ordinary shares for 1 preference share. The offer was accepted and the Conversion was made on July 1 torn, * No cash dividends ‘were declared on Ordinary shares until December 31, 2015. Cash dividends per Ordinary share were ‘declared and paid as follows: December 31 June 30 2015 4.00 = 2016 5.00 3.00 2017 P2.00 °2.50 Consider the above data and the result of the audit, answer the followin Outstanding number of ordinary shares as of December ‘31, 2017, 2 456,000 b. 465,000 © 856,000 4. 476,000 Outstanding number of preference shares as of December 31,2017. 2. 120,000 b. 40,000 © 50,000 4. 30,000 Amount of cash dividends declared and paid to ordinary shareholders for the year 2016, 2. P760,000 b. 1,216,000 © P1,824,000 d. 2,476,800 Paid to ordinary shareholders for the year 2017, Amount of cash dividends declared and 2. 3,802,000 b. P2,092,000 ©. P2,142,000 4. 4,888,800Picea roms ata 32. 33, 35, 36. Albento Corporation A partial ist of the accounts nts and ending accou idending. int balances taken from the post-closing trial balance of ‘Albento Corporation on December Acute profe-tot287 # stom ow Bonds payable Ordinary shares subscribed {oee-erm investment sares Share prism on orn shres uth on bonds payable Ordinary shares Preference shares subscribed Share premium on preference shar Preference shares " Share premium from treasury shares transactions Unreliable increase inthe value of securities available for sale Ordinary share options oustanding Ordinary share warrants outstanding ‘Subscription receivable fram ordinary shares - current Subscription receivable from preference shares current Treasury shares, ordinary shares a cost Farther investigation revealed the following lformation: ‘a. Ordinary share is no-par, with a stated val authorized, 135,000; shares issued and outstanding, 675,000 330,000 75,000 315,000 690,000 5,000 600,000 67,500 158,000 450,000 6,000 4500 22,500 7/500 15,000 7,500 60,000 iue of P10 per share. Shares 160,000; shares subscribed at P28 per share, 7,500. Shares authorized, 12,000; Shares b._ Preference share has a P50 par value. Issued and outstanding, 9,000; share ach share is cumulative, convertible annual dividend. Dividends are Bonds payable mature on July 2, payable sembannually. The premiu straight-line method. 12027, They carry 3 12 ‘Based on the foregoing, answer the following ‘What isthe total legal capital from ordinary shares? b. 1,371,000 ¢. 600,000 a, 675,000 What isthe total lego capital from preference shares? ‘a. 691,500 ib, P450,000 c. P685,500 What is the total additional paid-in capital? 2, P898,500 b, 864,000 c. P858,000 What is the total contributed capital? om2136.000 ——«b. P2, 056,500 «2,086,500 What s the total shareholders’ equity? b. 2,752,000 ¢.~P2,683,500 a. P2,706,000 ‘subseribed at P70 per share, 2,350. into 5 ordinary shares, and pays 3 7% notin arrears. 1% annual interest rate, im is being amortized using the 4. 1,365,000 d._ 517,500 . 894,000 d.P2,091,000 ,P2,700,000er of precision nya small manuacture of Bre of Atienza COMPA ements have been mad eee era ya cot orev te records ANN ST You have been asked bya cent ed ree te HOWE jer amin statements prepares Oe trond machines Your cnn ieee you toretow the accountng apereen or 2° Auenen Company has never been auated, but the annual sate Beotkeepe fac the flowing income before cos Income before taxes eaten ard 3 Yaronet 57180 amie to1200 Sz5600 wignment. These 2017 A elatively small number of machines have been shipped on consignmnene TES transactions have been recorded as ordinary sales and billed as SUC ‘each year, machines billed and inthe hands of consignees amounted to: 52,000 2015 2016 None 2017 44,720 Sales price was determined by adding 30% to cost. Assume the consigned machines are sold the following year. © On Match 30, 2016, twa machines were shipped to a customer on a CO D basis. The sale was not entered untl April S, 2016 when cash was received for P48,800. The machines were not included in the inventory at March 31, 2036. (The tite passed on ‘March 30, 2016.) 4 All machines are sold subject toa five-year warranty, itis estimated that the expense {0 be incurred in connection with the warranty will amount to 1/2 of 1% of ultimately Sales. The company has charged an expense account for warranty costs Incurred. Sales per books and warranty costs were: Year ended March 31 Sales Warranty Expense for sales made in 2015 2016 2017 Total 2015 7,520,000 _P6,080 6,080 2016 8,080,000 2,880 P10,480 13,360 2017 14,360,000 2560 12,960 15,280 30,800 © Bad debts have been recorded on a direct write off basis. Experience of similar enterprises indicates that losses will approximate 1/4 of 1% of sales, Bad debts written off were: ‘Bad debts incurred on sales made in 2015 2016 2017 Total 2015 6,000 P 6,000 2016 6,400 4,160 10,560 2017 2,800 14,400 13,600 30,800 ald. Commissions payable on March 31 ‘Commission on sales have been entered when of each year were: 2015 11,200 2016 6,400 8,960 2017 A review of the corporate minutes reveals the manager Is entitled to a bonus of 1/2 of 1% of the income before deducting income taxes and bonus. The bonuses have never been recorded or paid. Considering the above data and the result of the audit, answer the following: 37. Correct sales for the year ended March 31, 2015. d. 7,480,000 a 7,520,000 6. P7,468,000 « 38. Correct sales for the year ended March 31, 2016, 3 P8,128,800 b. 8,168,800 ©. PB,140,800 d. P8,180,800 7,492,000Eo 40. 41 2 a ra 4s, 4 49, ‘correct sales forthe year ended March 44,2637 300 18.315,7 $315,280 $14 276500 hatter ara oneetertearinasueainaay a. PAO,S32 b. P7132 99332 a PDS ‘Additional bad debs expense forthe year ended Macch 31, 2016. = nee b. P7426 © Pas 4 Me tional commission ona emmiion epee for ey ended Mae 3.2037 = masse b. P2560 © 74,560 2 ine Managrsbons pensar the et nde arth 3.2017 4 b. 73.608 74596 . nm Correct income before income tax forthe year ended March 31, 2035 a. 505,668 b. poigsee POR A? i. ane Certect income before income ta forthe yea ended March 33,2036 a. 737,952 b P505668 |e PSR IMO mur Correct income befor income tax for the yar ended March 31, 2037 3. P919,364 b Prinses P7ALSED a ae ‘Aranas Company ements rtne trate. nearing 8 Yon were engaged by ions opanyt aut fear Senn 27.05 2 oh. ow ae feriooked atthe end of 2036: books, you noted that certain adjustments had been ov et ecbveted that other tems had been improperty recorded. These omissions od other e708 ‘were summarized 3j33/2007 ners Salaries Payable 385,000 655, Interest Recetvable 159,750 194,400 Prepaid insurance 230850 268,000 420,750 352,200 Abeer tres TCenctone m9 stoma ha beth ceed ssa showshve ben (creed svc or caste serene gooas wre ot shed Ut tretolown iar si 391,500 473,000 Tela exendres had been corded oP ub shoud have een ch ed weiter, the cepreson ate we ergy bl deprecton nthe yo" seetarstobe copied a5) Jata andthe result ofthe aut, answer the following Considering the above d Whats te tra effect ofthe errors on the 2016 net income? ‘Understated by P927,450 Overstated by P123,750 Overstated by P60 300 4, Understated by P581,850 ‘What is the total effect of errors on the 2017 net income? a. Understated by P240,075. ‘c Overstated by P285,525 b. Overstated by P243,225 d. Understated by °282,375 Wats the total effect ofthe eros on the balance ofthe companysretaned earings at December 33, 2017? Understated by P116,25 Overstated by P64 425 b. Overstated by 9698,175 d, Understated by °199,350 Wher isthe total effec of th errors onthe company's warking capital at December 31,2017? Understated by P199,350 ‘¢. Overstated by P615,150 1b, Overstated by P89,550 4. Understated by P226,350