fe SRS Ss CRC-ACE The Professional CPA Review School Main: 3° C. Vilaroman Bldg. 873 P. Campa St. cor Espana, Sampaloc, Mania ‘@ (02) 735 8901 / 735 9031 / 0922 861 0191 ‘email add: crc_ace@yahoo.com Rasulo ‘Lower Mabini cor Diego Silang, Baguio City 3/F GCAM Bldg. Monteverde St. Davao City ‘@ (074) 442-1440 / 0922-8499196 ‘@ (082) 285-8805 / 0925-7272223 AUDITING OCTOBER 2017 BATCH PREWEEK QUIZZER 1 PROBLI 1 The following accounts were included in the unadjusted trial balance, of Paramount Company as of December 31, 2017: cack ne ca Cash Fearn 8-20for FB P 963,200 Accounts receivable (@5%6e#) Voen wie FY, 2,254,000 Inventory ei SL ORten: 6,050,000 Accounts payable begin ei oR 4,201,000 hecietepenan? bean Ee ferae © teem 431, 000 During your audit, you noted that Paramount Company held its cash books open after year-end. In addition, your audit revealed the following: 1. Receipts for January 2018 of P654,600 were recorded in the December 2017 cash receipts book. The receipts of P360,100 represent cash sles sg ee represent collections from customers, net of 5% 9 cash discounts. cake Orne horas 2. Accounts payable of P372,400 was palin January 2018, The payments, on which discounts of P12,400 ‘were taken, were included in the Dggember 2017 check register. apa 3. Merchandise inventory is valued at 6,0%,000 prior to any adjustments: The following information has ‘lm fig, been found relating to certain inventory transactions: 415707 thy invoice for goods costing P175,000 was reccived and recorded as a purchase on December 31, 2017. The related goods, shipped FOB destination, were received on January 4, 2018, and thus were Dou goods, shipped FOE ry 4, 2018, fedex ‘ot included in the physical inventory at ire 2 arch. JIS 77.5% 4. P182,000 shipment of goods to a customer on December 30, 2017, terms FOB destination are 21S. not included in the year-end inventory. The goods cost P130,000 and wete delivered to the * customer on January 3, 2018. The sale was properly recorded in 2018. G.rg.09 ¢, Goods costing P637,500 were shipped on December 31, 2017, and were delivered to the customer raoee on January 3, 2018. The terms of the invoice were FOB shipping point. The goods were included in the 2017 ending inventory even though the sale was recorded in 2017. . Goods costing P217,500 were received from a vendor on January 4, 2018. The related invoice was received and recorded in January 6, 2018. The goods were shipped on December 31, 2017, terms FOB shipping point. fovch, 07.0% ” 27,5 e. Goods value at P275,000 are on consignment with a customer. These goods are not included in the inventory figure. E £ Goods valued at P612,800 are on consignment from a vendor. These goods are not included in the physical inventory. z Based on the above and the result of your audit, determine the adjusted balances of the following as of December 31, 2017: 1. Cash a, P963,200 b. P681,000 ©P668,600 d. P693,400o~ ~- tee CRC-ACE/AUDITING: PREWEEK QUIZZER (OCT 2017 Batch) Page 3 of 21 Selling expenses 1,150,000 1,025,000 ‘Administrative expenses 600,000 525,000 ‘Total operating expenses 1.750,000 1,550,000 ‘Net income ‘P1,100,000 975,000 The 2018 audit revealed the following fact: a. On January 5, 2017, Universal Corporation had charged a 5-year insurance premium to expense, The premium totaled P31,000. b. The amount of loss due to bad-debts has steadily decreased over the last 2 years. Universal Corporation hhas decided to reduce the amount of bad debt expense from 2% to 1% % of sales, beginning with 2018. (A charge of 2% has already been made for 2018.) c. Universal Corpotation uses the periodic inventory system. The following are the inventory errors for the last 2 years 2017 - Ending inventory overstated by P75,500 2018 = Ending inventory overstated by P99,000 4. An equipment costing P150,000 was acquired on January 3, 2017. The purchase was recorded by a charge to operating expense. The equipment has a useful life of 10 years and a residual value of 25,000. Universal Corporation uses the straight-line method in depreciating its assets. ce. Assume that the books for 2018 have not yet been closed. Ignote tax implications. Based on the above information, answer the followirig 6. The December 31, 2018, adjusting entry to correct the expensing of insurance premium paid is @ Prepaid insurance 18,600 Insurance expense 6,200 Retained earnings 24,800 b. Prepaid insurance 18,600 : Retained earnings 18,600 7 spaont ee Insurance expense 18,600 Retained earnings 18,600 d.— Insuranée expense 6,200 - Retained earnings 6,200 7. ‘The December 31, 2018, adjusting entry to correct the expensing of the equipment purchased on January 3, 2019, should include a credit to a. Accumulated depreciation —P12,500. © __ Retained earnings —P138,500. € Equipment—P12,500. 4. Depreciation expense—P12,500, 8. ‘The December 31, 2018, adjusting entry to correct the inventory errors should include a debit to a. Cost of goods sold—P99,000. b. Inventory—P23,500. Medainth tarniney We © Retained earnings—P75,600. Ioleritt, we d. Cost of goods sold—P75,500. 9, What is Universal's corrected net income for the year ended December 31, 2017? a. 1,012,200 b. P1,212,800 cc. P786,800 © P1,061,800 10. What is Universal’s corrected net income for the year ended December 31, 2018? a. 1,095,200 b. P1,129,800 1,082,800 a. P1,107,800CRC-ACE/AUDITING: PREWEEK QUIZZER (OCT 2017 Batch) Page 5 of 21 PROBLEM 4 You were engaged by MARVEL COMPANY to audit its financial statements for the first time. In examining the books, you noted that certain adjustments had been overlooked at the end of 2017 and 2018. You also discovered that other items had becn improperly recorded. These omissions and other errors for each year are summarized below: 1231-18 . I2-31-17 Salaries Payable 780,000 873,600 Interest Receivable 213,000 259,200 Prepaid Insurance 307,800 384,000 Advances from Customers 561,000, 470,400 (Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped” intil the following year) Machinery 522,000 564,000 (Capital expenditures had been recorded as repairs but should have been charged to Machinery; the depreciation rate is 10% per year, but depreciation in the year of expenditute is to be recognized at 5%) _ Required: 16. What is the total effect of the errors on the 2017 net income? ‘A. Understated by P1,236,600 C. Overstated by P80,400 B. Understated by P775,800 (©) Overstated by P165,000 > 17. Whatis the total effect of the exrors on the 2018 net income? @ Understated by P320,100 c. Overstated by P324,300 b. Understated by P376,500 . Overstated by P380,700 18. What is the total effect of the errors on the company’s working capital at Dec. 31, 2018? a, Understated by P265,800 )Overstated by P820,200 b. Understated by P301,800 . Overstated by P119,400 19. Whats the total effect of the ertors on the balance of the company’s retained earnings at Dec. 31, 2018? a. Overstated by P855,900 ‘©Understated by P155,100 b. Overstated by P930,000 d. Understated by P265,800 20. ‘The necessary adjusting journal entry for the etror in recording capital expenditures on Machinery as of December 31, 2018, would include: A credit to retained earnings of P535,800 A credit to Accumulated Depreciation of P82,500 A debit to Depreciation Expense of P54,300 A debit to Machinery of P522,000 7 ao PROBLEM 5 In the course of our audit of Miramax Corporation's cash in bank for the year ended December 31, 2017, you ascertained the following information: November 30 December 31 Cash per book P 60,350 2 Cash per bank statement 535,410 689,085 Undeposited checks 41,005 64,400 Outstanding checks 138,590 150,560 Bank service charges 3,600 3,000 Insufficient fund check 41,250 Company's notes receivable Collected by bank 359,075 404,500CRC-ACE/AUDITING: PREWEEK QUIZZER (OCT 2017 Batch) Page 7 of 21 @& * Goods costing P217,500 were received from a vendor on January 4, 2018. The related invoice ‘was received and recorded on January 6, 2018. These goods were shipped by the vendor on December 31, 2017 under an FOB shipping point terms. * Goods costing P637,500 were shipped on December 31, 2017, and were received by the customer on January 2, 2018. The terms of the invoice were FOB shipping point. The sales of 815,000 has been recorded in 2017. * A shipment of goods invoiced at P182,000 to a customer on December 29, terms FOB destination was recorded in 2018. The cost of the related goods amounted to 130,000 and were received by the customer on January 4, 2018, * The invoice for goods costing P175,000 was teceived and recorded as purchase on December 31, 2017. The related goods, shipped FOB Destination were received on January 4, 208. * Goods valued at P612,800 are on consignment from a vendor. These goods were tMeluded in the physical court. x Requirements: Base on the result of your audit ascertain the following: 26. Adjusted balance of cash: 2. 963,200 . 581,000 b. 693,400 @ 668,600 27. Adjusted balance of accounts receivable: a. 2,254,000 © 2,564,000 b. 2,548,000 4. 2,908,600 28. Correct inventory ending balance: a. 5,422,200 16,035,000 b. 2,860,000 I 6,080,000 29. Adjusted accounts payable: a. 4,243,500 © 4,615,900 b. 4,398,400 d. 4,790,900 30. Net adjustment to cost of sales: @ Debit by P57,500 c. Credit by P580,000 b. Debit by P223,500 4. Credit by P555,300 PROBLEM 7 Limelight Corp. Presented to you the following Property, plant and equipment schedule as of December 31, 2017, in line with your audit of the same for 2018: Cost Accumulated Useful life/ Depreciation Depreciation Method Land 4,200,000 Building, 9,000,000 3,095,900 20years/Double Declining Machinery 15,000,000 6,000,000 10years/Straight line and equipment Furniture and fixture 6,000,000 3,709,091 10 years/SYD Audit notes: a The assets were acquired at the beginning of 2014 when the company started its operations. b. On March 1, 2018, Limelight Corp. incurred P230,000 in repairs cost to have various parts of the building: : © On June 30, 2018 an old machinery which originally costs P2,400,000 was exchanged for a machinery of Colon Company. Colon Company acquired the said machinery at P5,000,000 on July 1, 2013. The fair value of Limelight Corp.'s machinery on the exchange date was at P1,250,000. Limelight Corp. Paid additional cash at P200,000 on the exchange which was deemed to have the necessary commercial substance. LB 4. On March 1, 2018 some furniture and fixtures were sold for P400,000. These furniture were originally acquired at P1,800,000. Replacement furniture were acquired on June 30, 2018 at a total instrument Price of P2.4M payable in 3 equal installments starting June 30, 2019. Prevailing market rate of interest ‘on this date was at 8%, Additional freight and handling costs were paid at P138,322. Ww Su ayCRC-ACE/AUDITING: PREWEEK QUIZZER (OCT 2017 Batch) Page 9 of 21 38. What is the correct balance of the retained earnings unappropsiate account as of December 31, 2018? a, 10,070,000 © 9,270,000 b. 9,870,000 9,070,000 39. What is the total additional paid-in capital as of December 31, 2018? a. 5,100,000 5,280,000 © 5:230,000 4. 5,330,000 : 40. What is the total contributed capital as of December 31, 2018? a 13,650,000 © 13,780,000 b. 12,980,000 d_ 12,780,000 # PROBLEM § CLI loaned P’'16,500,000 to BDO Company on January 1, 2015. The initial loan repayment terms include a (0%) intexest rate plus anual principal payments of P 3,300,000 on January 1 each year. BDO Company made the required interest payment in 2015 but did not make the P 3,300,000 principal payment nor the P 1,650,000 interest payment for 2016. CLI is preparing its annual financial statements on December 31, 2016. BDO is having financial difficulty and CLI has concluded that the loan is impaired. Analysis of BDO’s financial condition on December 31, 2016, indicates the principal payments will be collected, but the collection of interest is unlikely. CLI did not accrue the interest on December 31, 2016. ‘The project cash flows are ew December 31, 2017 P 5250000 ter 4.772.175 December 31, 2018 6,000,000 #16e +. 968, Hop December 31, 2019 5,250,000 Be 4.44 ye ee nia, ee 41, What is the loan impairment loss on December 31, 2016? pea ss a PO © 2,824,500 Mp eS oae b. 1,650,000 dP 16,500,000 Imp. lose (2, $24.50) — 42. What is the interest income to be reported by CLI in 2017? a. P.979,305 cP 1,504,305 wh r.6 ‘ ® P1367,550 d. 1,650,000 a ee: Feae7 530 tipo 43. Whats the carrying value of the loan receivable on December 31, 2018? 13.678. @) 4,772,355 c P9,793,050 wfeiaai7 Lei 6a 5, 5,250,000 d. P'13,675,500 : . 12.00 1, TH os pion 2725 6.2.20 ¢. 44, What is the interest income in 2018? ioe a. 477,237 cP 1,367,550 tpoiprog ert 29 ® 979,305 dP 1,650,000 oe 45. What is the interest income in 2019? P 477,645 © P1,367,550 bP 979,305 4. P1,650,000 ® PROBLEM9 During the course of your audit of the financial statements of Four Star Corporation for the year ended December 31, 2017, you found a new account, “Investment in Equity Securities”. Your audit revealed that during 2017, Four Star began a program of investments and all investment related transactions were entered in this account. Your analysis of this account for 2017 follows: Four Star Corporation Analysis of Investment in Equity Securities For the year ended December 31, 2017 Debit Credit ‘Three Company Ordinary Shares Feb 14 Purchased 12,000 shares @ P5S per share P 660,000 Received 1,200 ordinary shares dividend July 26 (memorandum entry in general ledger)CRC-ACE/AUDITING: PREWEEK QUIZZER (OCT 2017 Batch) Page 11 of 21 ©) Research costs of P 99,000 were incurred early in 2017. They were capitalized and were to be amortized ‘over a 3 year period. Amortization of P 33,000 was recorded in 2017 and P 33,000 for 2018 @) On January 4, 2017, Hannover leased a building for 5 years at a monthly rental of P 24,000. On that date, the company paid the following amount, which were expensed when paid Security deposit P 60,000 First month’s rent 24,000 Last month’s rent 24,000 P 108,000 “e) The company received P 108,000 from a customer at the beginning of 2017 for services that it is to perform evenly over a 3 year period beginning in 2017. None of the amount received was reported as unearned revenue at the end of 2017 1) Merchandise inventory costing P 54,600 was in the warehouse at December 31, 2017’ but was incorrectly omitted from the physical count at that date. The company uses the periodic inventory meio toy Felh 2 B26 (na) Assume all amounts are material and ignore income tax effects 51. Hannover’s net income in 2017 in understated by A EO) @P 53,400 b. P 54,900 «. P56,400 a. passe ® (mm) — 52. He ’ 2018 aby nes lannover’s net income jn 2018 is overstated by : € (i680) a. P24,900 (8 P 30,900 ©. P 32,400 410200 ¢ "etm es S60 (too) 53. The retained earnings reported on Hannover’s statement of financial position at December 31, 2018 is understated by St we @P 22,500 b. P-24,000 . P 28,500 4P58500 4, sae ta eo fy PROBLEM 11 ‘On January 1, 2017, Solar Coxporation issued P 100,000, 10% 10 year bonds when the market rate of interest ‘was 8%, Interest is payable on June 30 and December 31. The following financial information is available Sales 300,000 © 2 te Cost of sales 180,000 i/y 103,542, Gross profit 120,000 efoo/iy ¥.StE eta ter, 18 Interest expense 1068 ? 4h £60 Ire, Depreciation expense (14,500) Mit see oy Other expenses 62,000) 29 Net income Sh ? December 31,2017 January 1, 2017 Accounts receivable 55,000 48,000 Inventory 87,000 93,000 Accounts payable 60,000 58,000 All purchases of inventory are on account, Other expenses are paid for in cmsh (4. n .45g¢ > FE, Gem FiO X09. SI9q 67,959 54, What is the carrying value of the bonds on December 31, 2017 a. P 100,000 b, P112,233 ve. P 112,64 P 113,592, 18. Sp E CO 3, 9, 55, Whats the interest ipeomme expense for 2017 mae a P4544 b. P8641 P9,069 d.P 10,000 fen -40 ate 56. How much was paid for inventory purchases Ne 48m ©, P 172,000 b. P174,000

P34,500 b. P37,500 . PA7,565 d. 33,825 9. The gain to be recognized on the exchange of machine 1 for office furniture on August 28, 2015, should be a. P1875 b. PO ©. P3675 . P675 10. The total depreciation for 2015 is a. P142,198 b. P126,391 ce. P142,716 d. P142,591 11. The gain (loss) to be recognized on the sale of vehicle on May 25, 2016, is a. P58) b. PG,630) c. P5S8 a. P4,630 12. The total depreciation expense for 2016, is a. P112,987 b. P117,059 c. P117,434 ad. P116,430 13. After the overhaul, machine 2's revised annual depreciation is a. P22,560 b, P50,192 cc. P26,100 4. 33,300 14, What is the cost of the new vehicle acquired on June 20, 2017? a. P81,000 b. P69,900 c. P58,800 a. P91,398 15, ‘The total depreciation expense for 2017 is a. P114,678 b. P118,593 cc P118,218 4. P108,288 Problem 3 You ate engaged in an audit of the financial statements of the Ondoy Company for the year ended October 31, 2017, and have observed the physical inventory count on that date. [All merchandise received up to and including October 30, 2017 has been included in the physical count. The following list of invoices is for purchases of merchandise and are entered in the purchases journal for the ‘months of October and November 2017, respectively: Amount FOB Date of Invoice Date Merchandise Received October 2017 7,200 Destination October 19 October 21 4400 Destination October 20 October 22 9,250 Shipping point October 20 October 30 : 3,900 Destination October 25 November 3 2,500 Destination November 4 October 29 10,250 Shipping point — October 25 October 30, 9,200 Shipping point October 25 October 30 13,600 Destination October 21 October 30 34,600 Destination October 29 October 30 NOVEMBER 2017 ‘2,000 Destination October 29 November 4 4,850 Destination October 30, October 31 6,420. Shipping point October 27 October 30 7,220 Shipping point © November2 October 30 12,820 Shipping point ' October 23 November 3 14,200 Shipping point October 23 November 3 15,000 Destination October 27 November 3CRC-ACE/AUDITING: PREWEEK QUIZZER 2 (OCT 2017 Batch) Page 5 of 16 Problem 5 In your audit of Pepeng, Inc.'s cash account as of December 31, 2016, is as follows: ‘The bookkeeper’s bank reconciliation on November 30, 2016, is as follows: Balance per bank statement, November 30 24,298 ‘Add: Deposits in transit 3.648 Total 27,946 Less: Outstanding checks No. 3408 P 440 No. 3413 300 No. 3414 6,820 No. 3416 3,924 No. 3417 800 12.284 Balance P 15,662 ‘Add: Bank service charge for November 2256 Balance per general ledger, November 30 15,698 * Entered in Check register in December ‘The Cash Receipts Journal shows total receipts for December of P 371,766. The Check Register reflects total checks issued in December of P 377,632. A collection of P 5,912 was recorded on company books on December 31 but was not deposited until January 2, 2017. ‘The balance per bank statement at December 31, 2016, is P 17,516. This statement shows total receipts of 373,502 and checks paid of P 380,284. ‘Your examination reveals the following additional information: 1)4 Check No. 3413 dated November 24, 2016, was entered in the Check Register as P300. Your examination of the paid checks returned with the December bank statement reveals that the amount of this check is — cantilihe 2) Check No. 3417 was mutilated and returned by the payee. A replacement check No. 3453 was issued. Both checks were entered in the Check Register but no entry was made to cancel check no. 3417. 3) The December bank statement includes an erroneous charge of P 480. 4) On January 3, 2017, the bank informed your client that a December bank service charge of P42 was omitted from the statement. 5) Your examination of the bank credit memo, accompanying the December bank statement discloses that it represents proceeds from the note receivable collection in December for P4,000. 6) The outstanding checks at December 31, 2016, are as follows: No. 3408 P 440 No. 3418 P2gi4 No. 34176 54% 800 No. 3419 5,788 26. What is the total book disbursements for the month of December? @) P 377,668 b. P377,710 cP 377,632 a P377,596 27. What is the book balance at December 31? a. P9832 b. P9,868 cP 9,754 ® P 9,796 28, The outstanding checks at December 31 totaled a. P8602 b. P9,072 @ P 9,042 dP 9,842 29. Whatis the adjusted bank balance on November 30? a. P 16,690 ® P 16,732 cc P16,804 4. 16,774 30. The adjusted book receipts for the month of December should be a. P375,124 b. 371,766 . P371,238 @® P 375,16 31. The adjusted book disbursements for the month of December should be a. 377,590 b. P377,662 © 377,674 & P377,632 tis the adjusted book balance on December 31? @® P 14,824 b. P 14,866 cP 14,908 dP 14,782CRC-ACE/AUDITING: PREWEEK QUIZZER 2 (OCT 2017 Batch) Page 7 of 16 PROBLEM 8 You were engaged as an independent auditor of Jeline Corp. In the course of your examination of the accounts on December 31, 2017, the end of the fiscal year, you determine that certain prepaid and acerued items were not recorded in prior years and in the current years as follows: End of 2015 2016 2017 Accrued expenses P 450 P 750 P 650 Prepaid expenses 500 1,200 800 Prepaid revenues Maenmned cata, 120 2 275 Revenues receivable 300 250 Retained earnings as at the end of 2015 amounted to P44,500; while net income for 2016 was reported at 12,600. The income summary account fot 2017 shows a credit balance of P15,000 before any audit comection. ‘You have verified that no dividends had been declared in the two-yeat period. Required: 37. The corrected earnings balance as of December 2015 is 44,430 - b. P 45,500 cP 57,850 d. None of these 38. The cotrected net income for the years ended December 2016 and 2017 are December 31, 2016 December 31, 2017 P 12,600 P 15,000 ® 13,420 - 14,375 é 14,670 16,800 a —_ None of these PROBLEM 9 CHEDING’S Corp., organized on June 1, 2017, was authorized to issue shares as follows: ‘* 800,000 shares of 9% preference shares, convertible, P100 par © 2,500,000 ordinary shares, P2.50 stated value ‘During the remainder of the fiscal year ended May 31, 2016, the following transactions were completed in the ‘order given: ‘+ 300,000 shares of preference shares were subscribed for at P105, and 900,000 ordinary shares were subseribed for at P26, Both subscriptions were payable 30% upon subscription, the balance in one payment. © The second subscription payment was received, except one subscriber for 60,000 ordinary shares defaulted on payment. The full amount paid by this subscriber was returned, and all of the fully paid shares was issued. 150,000 ordinary shares were reacquired by purchase at P28. Each preference share was converted into four ordinary shares. ‘The treasury share was exchanged for machinery with a fait market value of P4,300,000. ‘There was a 2-for-I shate split, and the stated value of the new ordinary share is P1.25 Net income was P830,000. Based on the above and the result of your audit, determine the following as of December 31, 2016: 39. Ordinary Share Capital ‘a P2,550,000 b. P2,100,000 © 5,100,000 4. 4,200,000 40. Total Share Premium 2, P50,890,000 48,340,000 48,808,000 YG P48, 240,000 41. Total Contributed Capital a. P53,908,000 ©@ P353,440,000 c. P55,990,000 d. P53,340,000 42, Total Shareholders’ equity a. 54,270,000 b, 54,738,000 . P56,820,000 © P54,170,000CRC-ACE/AUDITING: PREWEEK QUIZZER 2 (OCT 2017 Batch) Page 9 of 16 Based on the above and the result of your audit, answer the following: 43. The warranty expense in 2015 is ‘a. P100,000 b. P400,000 . P160,000. @ 230,000 44, ‘The provision for warranties as of December 31, 2015 is a. P580,000 ’. P230,000 © 480,000 4. P410,000 45. The provision for warranties to be reported as current liability as of December 31, 2015 is a 220,000 b. P150,000 @ 400,000 4. P330,000 46. The provision for warranties to be reported as noneurrent liability as of December 31, 2015 is ‘80,000 'b. P260,000 c. P150,000 d. P330,000 47. Total provisions to be reported in the balance sheet as of December 31, 2015 is @) 480,000 ’b. 410,000 c. 1,180,000 d, P1,360,000 PROBLEM NO. 11 Padyak Specialty Company manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets, Since beginning operations in 2013, Padyak has used ‘normal absorption costing and has assumed a firstin, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Padyak’s fiscal year, November 30, 2016, are shown below. ‘The inventoties are stated at cost before any year-end adjustments. Finished goods 647,000 Work in process 112,500 ‘Raw Materials 264,000 Factory supplies 69,000 "The following information relates to Padyak’s inventory and operations. 1, The finished goods inventory consists of the items analyzed below. Cost NRV ‘Down tube shifter Standard model 67,500 67,000 Click adjustment model 94,500 89,000 Deluxe model 108,000 110,000 ‘Total down tube shifters ‘270,000 266,000 * Barend shifter Standard model 83,000 90,050 Click adjustment model 99,000 97.550 lick adjustment model 182,000 187,600 Head tube shifter Standard model 78,000 77,650 Click adjustment model 117,000 119,300 ‘Total head tube shifters 195,000 196.950 ‘Total finished goods 647,000 650,550 2. One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment. 3. Three-quatters of the bar end shifter finished goods inventory had been pledged as collateral for a bank Joan. 4, One-half of the raw materials balance represents derailleurs acquired at a contracted price 20 percent above the net realizable value. The net realizable value of the rest of the raw materials is P127,400. 5. The total net realizable value of the work in process inventory is P108,700. 6. Included in the cost of factory supplies are obsolete items with historical cost of P4,200. The net realizable value of the remaining factory supplies is P65,900.CRC-ACE/AUDITING: PREWEEK QUIZZER 2 (OCT 2017 Batch) Page 11 of 16 52. What is the adjusted Petty cash fund balance on December 31, 2016? a. P4347 @)P10,250 . P30,000. . P24,097 53. The petty cash shortage on December 31, 2016, is a. PO , P5,903, ©P3,500 . P4347 54, What is the adjusted Cash in bank ~ Tsunami Bank balance on December 31, 2016? a. P500,010 b. P748,320 432,710 d. P429,110 55, The entry to adjust the Cash in bank ~ Tsunami Bank account should include a debit to @) Accounts receivable for P89,800 B. Accounts receivable for P86,300 ¢. Accounts payable for P228,200 ._ Interest expense for P1,950 56. The December 31, 2016, statement of financial position should show “Cash and cash equivalents” at a. P6,142,960 b. P5,439,360 c. P4,442,960, @ P5,442,960 PROBLEM NO. 13 ‘The following independent situations relate to the audit of shareholders’ equity. Answer the questions at the end of each situation. BRANDY CO. was organized at the beginning of the current year. The following shareholders’ equity accounts are included in the entiy’s year-end trial balance. Preference share capital, P100 par, authorized 100,000 shares, issued and outstanding, 66,000 shares 6,600,000 Preference share capital subscribed, 6,000 shares 600,000 Share premium - preference 240,000 Subscriptions receivable - preference 360,000, ‘Ordinary share capital, P10 par value, authorized 200,000 shares, issued and outstanding, 72,000 shares 720,000 - ‘Ordinary share capital subsctibed, 72,000 shares 720,000 - Shate premium - ordinary 2,850,000» ‘Subscriptions received - ordinary 1,080,000 “The following current year transactions relate to Brandy Co.’s shareholders” equity: ‘© Immediately after Brandy Co. was organized, it received subscriptions to 60,000 preference shares. Subscriptions to ordinary shares were also received on the same date. © Daring the year, subscriptions were received for an additional 12,000 preference shares at a price of P120 per share. © Cash payments were received from subscribers at frequent intervals for several months after subsctiption. The company’s policy is to issue share certificates only upon full payment of the share . subscription. Also during the current year, Brandy Co. issued 24,000 ordinary shares in exchange for a tract of land with a fair value of P690,000. 57. What is the total subscription price of the ordinary shares originally subscribed? a, P4,290,000. b. P3,840,000 © P3,600,000 . P4,050,000 58, How much was collected from the subscribers of preference shares? a. P1,440,000 b. P5,640,000 . P7,440,000 @P7,080,000 59. The company’s statement of financial position at the end of the current year should reported contributed capital of Preference Ordinary 7,440,000 4,290,000 ® 7,080,000 ‘ 3,210,000 = 6,480,000 2,490,000 4 6,840,000 360,000CRC-ACE/AUDITING: PREWEEK QUIZZER 2 (OCT 2017 Batch) Page 13 of 16 68. In gathering evidence regarding the valuation assertion of an audit clicnt’s accounts receivable, the auditor should inquire with the management regarding their policy of providing bad debt expense and the corresponding allowance and more importantly, gather evidence regarding the reasonableness of such policy. Which of the following may be a possible source of evidence regarding the reasonableness of an audit client's policy of providing bad debts? @ Subsequent events happening after the balance sheet date but before the issuance of the financial statements. é b. Historical experience of the audit client regarding writing off uncollectible accounts. c. Bad debt expetience of similar company within the same industry. 4d. All of the above. 69. To gather evidence regarding the deposits in transit in a client-prepared bank reconciliation statement, an auditor would examine @) Cut-off bank statement “b. Year-end bank statement c. Bank confirmation reply d. General ledger 70. In validating the bank reconciliation statements of the client, the auditor should trace back the unrecorded debits, like service charges to the Bank statement of the current month . Accounts payable voucher Cancelled checks returned by the baok d. Cut-off bank statement of the subsequent month 71. In validating the bank reconciliation statements of the client, the auditor should trace back outstanding checks to the: G Cut off bank statement of the subsequent month b. Accounts payable voucher c. Cancelled checks returned by the bank d. Bank statement of the current month 72. ‘The proof of cash statements is usually prepared by the auditor when .)_ Internal control over cash is weak and control risk is place at the maximum. . Internal control over cash is strong and control risk is placed at the maximum, ¢. Cash balance is very significant 4. Cash balance is very insignificant 73. Which of the following procedures would an auditor likely do to perform search for unrecorded liabilities and which financial assertion is mostly validated by the procedure? ) Vouching a sample of cash disbursements recorded just after year-end to receiving reports and ~ supplier’s invoices which is consistent in gathering evidence about the completeness of the recorded liabilities. : b. Vouching a sample of entries in the purchases journal before year end to the unmatched receiving report file which is consistent in gathering evidence about the existence assertion of the recorded liabilities. c Comparing « sample of phrchase orders issued just after year-end with the year-end accounts payable entries which is consistent in gathering evidence about the completeness of the recorded liabilities. «. Scanning the cash disbursements entries recorded just after year-end for indications of unusual transactions which is consistent in gathering evidence about the existence of the recorded liabilities. 74, In auditing the accounts payable balance, the client’s controller has provided you with a schedule listing the creditors and the amount owned to each at December 31, 2016. Which of the following audit procedures would be your best choice for determining that no individual account payable has been omitted from the schedule? @ Examine support for selected January 2017 payments to creditors, ascertaining that those relating to 2016 are on this schedule. b. Send confirmation request to a randomly selected sample of creditors listed on the schedule. c. Send confirmation requests to creditors that are listed on the schedule but not listed on the cortesponding December 31, 2015 schedule. dd. Examine support for selected January 2017 payments to creditors, ascertaining that those relating to 2017 are not on the schedule.CRC-ACE/AUDITING: PREWEEK QUIZZER 2 (OCT 2017 Batch) Page 15 of 16 83. An auditor most likely would analyze inventory turn-over rates to obtain evidence concerning ‘management's assertion about: @ Valuation b. Existence and occurrence Rights and obligation . Completeness 84. The auditor may conclude that depreciation charges may be insufficient if he ot she notes: @) Excessive recurting losses on retired assets . Large amounts of fully depreciated assets c. Continuous trade-ins of relatively new assets d._ Insured values greatly in excess of book values 85. The auditor suspects that the depreciation charges may have been overstated in the previous as well as in the current year. Which of the following observations made it consistent with this suspicion? ) The auditor has discovered through the property, plant and equipment records there are many fully depreciated assets that are still in operations. b. The auditor has discovered through inspection of property, plant and equipment records that the company has consistently incurred significant losses on retirement of property, plant and ‘equipment, c. The auditor has discovered continuous trade-ins of relatively new assets. d. The auditor has observed that the carrying values of the propetties ate significantly in excess of their insured values. 86. As part of auditing an audit clients’ property, plant and equipment accounts, the auditor requested from the client @ schedule of property additions and a schedule of repairs and maintenance expenses during the period under audit. Which of the fl is correct regarding the two schedules? @® The schedule of property additions during the year is essential in gathering evidence regarding the gxistence assertion over PPE while the schedule of repairs and maintenance expenses account is necessary in gathering evidence regarding the completéness assertion over PPE. b. The schedule of property additions during the year is essential in gatheting evidence regarding the completeness assertion over the PPE while the schedule of repairs and maintenance expense account is necessary in gathering evidence regarding the existence assertion over PPE, The schedule of the property additions during the year is essential in gathering evidence regarding, the valuation assertion over PPE while the schedule of repairs and maintenance expense account is necessary in gathering evidence regarding the existence assertion over PPE. d. The schedule of property additions during the year and the schedule of repairs and maintenance ‘expense account is necessary in gathering evidence regarding the valuation assertion over PPE. 87; In testing for unrecorded retizement of equipment, an auditor most likely would: @ Select items of equipment from the accounting records and then locate them during the plant tour. 'b. Compare depreciation journal entries with similar prior year entries in search of fully depreciated. Inspect items of equipment observed during the plant tour and then trace them to the equipment subsidiary ledger. : d. Scan the general journal for unusual equipment additions and excessive debits to repairs and maintenance expense. 88. Vouching intangible assets listed in the client's schedule of intangible assets addition during the year to the documentation of the purchase of intangible assets is consistent with the auditor's objective of validating the management's assertion of: Existence and rights ‘Valuation and rights Completeness and existence Existence and valuation ee e® 89. In auditing intangible assets, and auditor most likely would review or recomputed amortization and determine whether amortization period is reasonable in support of management's financial statement assertion of Valuation b, Existence c. Completeness ._ Rights and obligation