_EASY 4 - Auditing listed entities. It is the centerpiece of the revised auditor's report. It is the subject of a new separate standard, 1SA 701. It may be applied voluntarily to other audits and maybe applicable to entities other than listed entities if required by law or regulation. A. Basis for Opinion eae | B. Other Reporting Responsibilities | C. Key Audit Matters | D. Responsibilities for the Financial Statements | ‘AVERAGE §— Auditing Time: 45 Sec z fa a ‘On January 1, 2017, Hope Co. acquired land 7,800,000 by issuing a 3-year, 10%, 2,000,000 bonds-Principal is due on January 1, 2020 but interéatis due at each year end. The financial liability is traded on an active market and is quoted at P1,814,320. The effective interest rate for the | | similar instrument is 14%. : aot 1 we Ah tap I Assume Hope opted to use revaluation model for its PPE and that the fait value of the land as of | December 31, 2017 is P2,000,000, how much is the net impact in 2017 comprehensive income related | 1 | to the above data? (indicate if net increase or net decrease) ——_—___—_—_ | On January 1, 2008 an entity invested P1 million ina loan with a par value of P1 million. The loan pays | 7.5% interest on December 31 annually in arrears and is to be redeemed at par on December 31, 2018. | The entity accounts for the loan at amortized cost. On January 1, 2014 it unconditionally selis the right to receive the remaining five interest payments to a | ‘bank. The derecognition provisions of IFRS 9 are applied to the interest payments as an identifiable part | | of the asset, leading to the conclusion that they are required to be derecognized. As at January 1, 2014, | | of the payments at the current market interest rate that would be available to the borrower of 5%. VAL AG ? Ge eee eer tO peer clei end financial statements contained the following errors December 31,2016 — December 31, 2017 Ending inventory P91,000 overstated 61,000 understated Accounts payable P54,000 understated 62,000 overstated Depreciation expense 23,000 understated - | An insurance premium covering years 2016, 2017 and 2018 amounting to P135,000 was prepaid and expensed _ in full in 2046. increase in fair value on FVOCI investment amounting to P52,000 and P38,790 for 2016 and | 2017, respectively, were included in profit or loss. What is the under/overstatement of GiL’s working capital as of December 31, 2016 due to the errors? (indicate | if over or under) iOn April 1, 2017 a company engages in the development of a property, which is expected to take five years to complete, at a cost of PéM. the statements of financial position at December 31, 2016 and December 31, 2017, prior to capitalizatic terest are as follows: Aziat/16 42/34/17 Development property P : 1,200,000 | Other assets 6,000,000 6,000,000 | P 6,000,000 P7,200,000 | Loans 7 i 5.5% debenture stock P 2,500,000 2,600,000 > 1% i Bank loan at 6% per - 1,200,000 | annum | Bank loan at 7% per annum, 4,000,000 4,000,000 = 30.07 | P- 3,000,000 4,700,000 WaT siiabaues Shareholders’ equity 2,500,000 2,500,000 uv The bank loan with effective interest rate at 6% was drawn down to match the development expenditure on April 1, July 1, and October 1 2017. The 5.5% debenture stocks were redeemable. Expenditure was incurred on the | development as follows: April 1 — P600,000; July 1 - P400,000; October 1 ~ 200,000. apheani ey Soecieteceeeeet If all the borrowing were general (i.e., the bank loan 6% was not specific to the development) and would have been avoided but for the development, then the amount of interest to be capitalized would be (Round-off to 2 | | decimal % for the general borrowing rate) \ K | a | A. PAt,580 C.P40.850 Me B. P42,870 D. P43,790 DIFFICULT 2 - Auditing Time: 60 Seconds —— ‘On January 2014, the board of directors of KINGSMEN Corp, authorized the grant ot 100 stock option per employee to supplement the salaries of loyees. Each stock option permits. thé purchase of one share of KINGSMEN Corp. ordinary share at a price of P25 per share (par value P20). The market price of the stock on January 1, 2014 is P40 per share. The options, which has a market value of P12-per option vest, or become exercisable, beginning on January 1, 2017, if the employees stay with the Company for the entire three-year vesting period and provided that the average revenue growth rate during the vesting period is at 20%. ony 25 option Per employee will vest if the average revenue growth rate over the vesting period is 4t 30% or additional. 50 option per employee will vest if the average revenue growth rate over the vesting-periad is at 40%. The options expire on December 31, 2018. By the end of 2014, none of the employees left the company and that the company estimates that none will leave until the vesting period ends. Furthermore, the actual revenue growth rate in 2014 was at 25%, the company expects the rate will be sustained over the next two years? am? Requirements: AW or 4. Whatis the amount recognized as expense in 20147 2. Assuming that 5 employee left the company by the end of 2015, and it was estimated that another 10 employees will leave by the end of 2016, furthermore, the actual revenue growth rate in 2015 was at 32.5% and that the company expects that this rate will be sustained over the following year, what is the amount recognized as expense in 2015?‘An entity plans to dispose of a group of its assets (as an asset sale). The assets form a disposal group, and are | measured as follows: t Carrying amount Carrying amount before as re-measured i reclassification as immediately before | held forsale reclassification as. | held for sale Goodwill P 1,500,000 P 1,500,000' (,4 » Ger PPE (carried at revalued amount) 4,800,000 4,000,000 <— flee be PPE (carried at cost) 5,700,000 5,700,000 — pare ‘ Inventory 2'400,000 2,200,000 -, ) PR oy Investment in equity securities 1,800,000 1,500,000 \ © | Total 16,000,000 P14,900,000/ The entity measures the fair value less costs to sell of the disposal group as P13,000,000. Determine the carrying amount of the PPE (carried at r&valued ai sale, (Round off amounts in nearest peso) un) after classifying the group as held for | | | ~~ [EASY 2— Auditing : Time: 10Sec_ eee TOPE Which of the following organizations is not directiylindirectiy represented in the 15-m | |. Bureau of Internal Revenue (BIR) |. Commission on Audit (COA) lll. Securities and Exchange Commission (SEC) |\V. _ Professional Regulations Commission (PRC) CLINCHER 1 - Auditing Time: 45 Sec On 4 January 20X8, an entity enters into a non-cancellable contract to transfer a product to a customer on 31 March 20X9, The contract requires the customer to pay consideration of P1,000 in advance on 31 January 20X9. ‘The customer pays the consideration on 1 March 20X9. The entity transfers the product on 31 March 20X9. Kindly provide the journal entries for the following dates in relation to the contract above: |. The amount of consideration is due on 31 January 20X9 (which is when the entity recognizes a receivable because it has an unconditional right to consideration) Il. The entity receives the cash on 1 March 20X9 tll, The entity satisfies the performance obligation on 31 March 20X9: Apply PFRS 15