University of Perpetual Help System Dalta

Applied auditing RJ CARASCO

PRACTICE SET

Problem 1. The following transactions affecting the accounts receivable of WON Inc. took place during the year
ended December 31,2020:
Sales P5,900,000
Sales discount 126,000
Cash received from cash customers 2,100,000
Accounts receivable written off as worthless 50,000
Credit memo issued to credit customers for sales returns 250,000
Cash refunds given to cash customers for sales returns 20,000
Recoveries on accounts receivable written off as uncollectible as
uncollectible in prior periods (not included in cash amount stated above) 80,000

The following balances were taken from the January 1,2020 Statement of Financial Position:
Accounts Receivable 950,000
Allow. For Bad Debts 100,000

The entity provided for bad debt expense by crediting allowance for bad debts in the amount of 70,000 for the year.
The net realizable value of Accounts Receivable on December 31,2020 is P1,100,000.

What is the cash basis revenue for the year ended December 31,2020?

Problem 2. The following information appears in ION Inc.’s records for the year ended December 31,2020:

Inventory, January 1 P 650,000

Purchase returns 80,000
Freight In 60,000
Sales 3,400,000
Sales returns 30,000
Accounts Payable, Jan. 1 300,000
Accounts Payable, Dec. 31 200,000

On December 31,2020, a physical inventory revealed that the ending inventory was only P571,000. The gross profit
on sales has remained constant at 30% in recent years.
What is the cash basis cost of sales for the year ended December 31,2020?

Problem 3. The following information appears in NEO Inc.’s records for the year ended December 31,2020:
Inventory, January 1 P 520,000
Purchase returns 60,000
Freight In 100,000
Sales 4,900,000
Sales returns 400,000
Accounts Payable, Jan. 1 2,000,000
Accounts Pay. Dec. 31 2,500,000
On December 31,2020 a physical inventory revealed that the ending inventory was only P200,000. The gross profit
based on cost has remained at 50% in recent years.
What is the cash basis cost of sales?

Problem 4. On December 31,2021, EMO Inc. presented the following information:

1/1/2021 12/31/2021
Raw Materials 300,000 600,000
Goods in Process 1,000,000 1,300,000
Finished Goods 1,400,000 1,000,000
Accounts Payable 2,200,000 2,000,000

Data for 2020 were:

Sales 3,000,000
Freight In 1,000,000
Purchase Return 100,000
Direct Labor 100,000
Manufacturing Overhead 50% of Direct Labor
Average Gross Profit Rate 30% based on sales

What is the net cash paid to suppliers of raw materials inventory?

Problem 5. The financial statements of ZEN Inc. included the following:

1/1/2020 12/31/2020
Accounts Receivable at Net Realizable Value 1,200,000 1,640,000
Allowance for bad debts 60,000 ?
Sales 8,000,000
Sales Discount 100,000
Sales Return 200,000
The cash collections included a recovery of P100,000 from a customer whose account had been written off as
worthless in 2019. During 2020, it was necessary to recognize bad debt expense of P100,000 and write off worthless
customer’s account of P30,000. On December 1,2020, a customer settled an account by issuing a 12%, six-month
note for P400,000.
What is the cash basis sales revenue?

Problem 6. WAY Inc. kept its records on accrual basis accounting. At the end of 2020, the accountant prepared the
following accrual basis income statement:
Revenue 1,910,000
Expenses 809,000

The following data are also available:

2019 2020
Accrued revenue 91,000 73,000
Unearned revenue 66,000 108,000
Accrued expenses 49,000 65,000
Prepaid expenses 46,000 56,000
What is the cash basis net income based on the foregoing data?

Problem 7
The income statement of PRTC Inc. for 2020 included the following items:
Interest income P2,101,000
Salaries expense 1,650,000
Insurance expense 277,200

The following balances have been excerpted from PRTC Inc.’s Statement of Financial Position:
12/31/2019 12/31/2020
Accrued interest receivable P165,000 P200,200
Accrued salaries payable 92,400 195,800
Prepaid insurance 33,000 24,200

Required: Based on the above and the result of your audit, determine the following:
1. The cash received for interest during 2020
2. The cash paid for salaries during 2020
3. The cash paid for insurance premiums during 2020

END