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    25 views7 pages

    5 6116287455344722071 PDF

    Uploaded by

    Wa TuZi

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    © All Rights Reserved
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    of 7
    ReSA jz] The Review School of Accountan @Tel. No. 735-9807 & 734-3989 AUDITING PROBLEMS TRENEO/ESPENILLA ‘SOLUTIONS TO QUIZZER 1 - PAS 8; CASH/ACCRUAL, SINGLE ENTRY PROBLEM 1: BEE.CO, Tans c- Depreciation er books: P250,000/8yr (a Adtional deprecation on capable © TS? major repairs (220,000/11yt5) (0) 20,000 Depreciation expense per audit (51,250) () the expired ie ofthe asset os of 1/1/1278 ears 290 from 12/31/14) was 5 years, thus fay esi (343) 8 year, Deprtcaton pr bok empted ae: zum Cerise ta." ‘major repos Cos should have been capitalized on 1/1/12 and deprecated overt toting useful te of the related asset. Total life of asset rs computed as (Total Cost 500,000/31,250 = 16 1s 16 years computed as (Total Cost/Annual Depreciation per books), years. ‘Remaining useful lite as of 1/1/12 Is 16 years ~ 5 years = 11 years. NL2012 NI 2013 -NIL2014 RE, bea WC, 2014 2014 Unadjusted balances 100,000 P145,000 185,000 2. Unearmed rent income, under 2014 (6.500) (6.500) . Salaries payable, under 2011 2,500. = - bal ‘Salaries payable, under 2012 (6,500) 5,500 = Salaries payable, under 2013 (gon) soo C7.son Salaries payable, under 2014 (4,700) (4,700) \. Unused supplies, under 2011 (3,500) . . Unused supplies, under 2012 6,500 (6,500) Unused supplies, under 2013 "57700 (3,700) 3,700 Unused supplies, under 2014 “77100 7,00 4. Repairs expense, over 2012 220,000 1° 220,000 Depreciation expense, under 2012-2014 (20,000) (20,000) (20,000) (40,000) Adjusted balances ([F300,000 [420,200 | 2.AnsD. 3.AneB. 4,AnsD. 5.AnsA. 6.AnsB. 2013 2014 Unadjusted pretax income pasase0o 73,489,000 ‘2.2013 sales overstatement Giris;b00) "1,718,000 B. 2013 inventory understatement 338,000 (388,800) ventory overstatement (255,000) . Understatement in interest expense due to ‘smortizauon’ot bond discount: (2) 20132 "10,640,250°7% ~ 744,018 Less: 11,250,000*6% = 675,006 * (69,818) } 2ois: 10,710/088°7% = 749,708 | : Less: 11,250,000"656 = 675,000 (74,705) 4, Ordinary Fepairs (282,500) (423/000) Overstotement in depreciation: "Eins copltatzed in 2013, 382,500%20% 76,500, Botance of amt, cap. In 2013: 306,00020% 61,200 ‘amount capitalized in 2015: 423,000*20% 4/600 [ADJUSTED PRETAX INCOME (ezesa.sa [panes (a) The loan was orginated on 1/1/12 at P10,575,000 (11,250,000-675,000), Discount amortization by 12/31/12 therefore shal be: Correct interest (10,575,000*7%) 740,250 ‘Less: Nominal interest (11,250,000°6%) 675,000 2012 Amortization: 65.250 Zanying value of Bonds’ 12/31/12 (10,575,000%65,250), P10.640.250 a PROBLEM 3:-LOT INC. Hee scpréciation per books (Machine XYZ): 400,000*3/10 _P20,000 secamulated deprecation per audit: 450,000°3/10, "138,000 ‘Adjustment related to the under depn for 3 years (2011 to 2014) P1S,000 credit Ae retcum depn attributed to old equipment traded in 2011) 150,000 Senet NET ADJUSTMENT TO ACCUM DEPN ACCOUNT PA35.000 debit sector pr er Co ncn feat Ae Divide by: Revised remaining useful life _Svears DEPRECIATION FOR THE YEAR (Mach XYZ) ro Carrying value, 1/1/2014: 393,750*10/12 c 328,13 a Multply by: 150% declining balance rate: (1/6)*150% ay DEPRECIATION EXPENSE (Mach UVW) 2.033 0. 100 Carrying value, 1/1/2014: 4,500,000*17/20 3,825,000 Less: Salvage value 73,775,000 epreciable ‘APQI ~ PAS 8; CASH/ACORUAL - SOLUTIONS. Mutiply by: SYD rate 12/78 —Psn0.768 3,825,000 "$80,789 a, *Deoreciovion shat be based on the remaining ease term as of Juy 1, 2013 (the date improvements ware completed) DEMREGIATON PENSE Sarin vie, Vs 28i6 Depreciation for 20/4 BUTLDING CAnavING VALUE 12/2014 Tans e Understatement tn Depr 2075 miu Unadjusted bataces aaa «Prepaid nsrence, 2013 understated Prepaid insurance, 2015, am uncerse : b: Accried expense, 20/3 understand ‘Accrued expense, 2014 understated anaes Acerve enperae, 2015 understated © Aenved icone, 2013 uncecated 65,000 ‘Accrued income, 2014 undersoted Accrved income, 2018 undersea 4: Reps pense, 2013 orevtated 760,000 Deprecaton pense, 2079 under (AyD) Depreciaiton expense, 2014 under Depreciatton expense, 2015 under ‘Adjurted balances 13. Ams, PROBLEM §: BABY INC, c 20132014 Net Inc. Wet Inc. Balance 600,000 750,000 2. 2013 Accured expense under (90,090) 90,000 2014 Accmed expense under (110,000) 2015 Accrued expense under 2013 Accrued rertat inc under 440,000 (40,000) 2014 Accrued rental inc under 45,000 205 Accrued rental inc under 12013 Prepaid expense under 20,000 (20,000) 2014 Prepaid expense under 36,000 2015 Prepaid expense under 'b. 2013 Equipment charged to ep 400,000 2013/2014/2015 Deor under (80,000) (60,000) 2015 Equipment charged to exo 2015 Depreciation under Cash div. charged to otherexp 100,000 150,000 ‘Land, donation from 3 stockholder (APIC) * Loss on inventory dve to flood M2014 NIZ015-REBea'tS = 2015 we 900,000 4,700,000 (75,000) 100,000 = 100,000 50,000 - (75,000) 75,000 (9,000) 447,000) > (47,000) (85,000) . 37,000 (37,000) «37,000 71,000 71,000 760,000 (40,000) (80,000) (80,000) 14 Ane. 8, 15. Ane. as 2015 2015 205 Net nc. RE, 8e9 RE, En we 300,000, 2,000,000, 310,000 (110,000) (98,000) (98,000) (90,000) (45,000) 95,000 ‘50,000 50,000 50,000 (30,000) 30.000 735,000 35,000 38,000 400,000 400,000 (180,000) (240,000) ‘$50,000 (210,000) 3 (a01-000) (400,000) mz0s — ML2OLS. M2016 Eben 6 WEA7016 usted bolonces 1,020,000 1430000 1,805,000 tent expense, over 2015 ane “ez.o00 120000 fart expanee, under 2016 teooo, scone «0000 . Sloas payable, under 2014 : , Soles payebe, under 2015 BRO sm Om Salaries payabe, under 2016 ose) z cc AnfSaies under S018 135)000 (135,000) al An/Soes uncer 2016 174000 ; 6. Abranees to suppers, onder 2015 1ns000 tec) 105000 “Aovances to supple, onder 2016 2 «Ea, under) Rope, over 2035 250,000 2504 AAD, under} Depr exp, under 15; "16 ‘Adjusted balances PROBLEM 7: STARK CORP, 27. Ama. D. Correct cost of donated equlpment: air marker value on Jy 3, 2014 ‘Direcrly arstbutable/Incdental cost Divide by: Uselut ie af the equipment Correct depreciation expense = PAS 8; CASH/ACCRUAL - SOLUTIONS INENEO/ESPENILLA Unacyusted net income M2014 NL 2015 MLL2018 RE, ben 2015, eee ati, Mga, Ms {Unused supplies, under + (@5,000), {unused

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