CPA REVIEW SCHOOL OF THE PHILIPPINES AP-PW77-2-SOL Manila AUDITING PROBLEMS. CPA Review PROBLEM NO. 1 - BEBEL COMPANY ‘SUMMARY INCREASES | 2013 2014 15 2013 wie 2015 _ Natieore a8 reported 143,200 | P220,600 | Paci 160 2. Eiminaton ofarofit on ‘consignments: Billed at 130% of cost 43,000. 41,180. Cost 130%) $0,000" 8.500. Profit error 2000 | sooo 2550 | (6,000) 3,000 (2,580) 3. To correct COD sale 42,200 (12,200) 4. Adustment of waranily perce: Sales per books 4,880,000 | 2,020,000 _| 3,530,000 Corrections for Cansigrmonts (t3,000) |" 13,000 (17,180) Correction tor COD sale 42,200 (12,200) eee mi TH | iaszoo Tssecae (172 of 1%), 9,335 410,226 17,833. Ces chargod sponse His) (e405 | (700) Adon expense ZaNe §os8 | iiss | 7.816) | (6.686) OAS} 5._ Bad debi adjusimenis: Normal bad debt expense, Ye of 1% of sales. 4666 5443, 8917 Frovioss wnte-off us00) [ean | 00) ‘Additional exponsas 2168 2a Tia Bie) | ara cay 6. Adjustment for commiasons 526,417 229,841 180,390, 7. Adjustment for bonus, % of 1% of income before ‘axes & bonus. C2 a TNCOME BEFORE INCOME TAXES Bios | ees [eras | LA 2D 3B 4A 5A 6D 7A 86 SA 1A PROBLEM NO. 2~ MINA MINING CO. Depletable/Depreciable Cost Estimated Reserves i Mineral property —P 26,100,000" 120,000 P217.50 Building 1,080,000 120,000 9.00 Machinery (1/2) ‘900,000 120,000 7.50 Machinery (1/2) 900,000 120,000 15.00 * 327,000,000 ~ P900,000 3900,000/120,000) x 2 1D * Depletion Depreciation Mineral property (P217.50 x 6,000) 1,305,000 Building (P9 x 6,000) P 54,000 Machinery (1/2) (P7.50 x 6,000) 45,000 Machinery (1/2) (P25 x 6,000) —20,000 P1.305,000 — P189,000‘GPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) APN Pe 2 : ——___Year 5 ___ Depreciation Mineral property (P217.50 x 12,000) 2,610,000 Building (P9 x 12,000) 108,000 Machinery (1/2) (P7.50 x 12,000) 90,000 Machinery (1/2) (P15 x 12,000) 180,000 2,630,000 378,000 3D Ye Depletion Depreciation Minera! property (P217.50 x 12,000) 2,610,000 Building (P9 x 12,000) 108,000 Machinery (1/2) (P7.50 x 12,000) 90,000 Machinery (1/2) {P15 x 6,000) 4A Year 11 Depletion Depreciation Mineral property (P217.50 x 6,000) P1,305,000 Building (P9 x 6,000) 54,000 Machinery (1/2) (P7.50 x 6,000) 45,000 Machinery (1/2) (P15 x 6,000) aia || BO 5A Year 4 Mineral property (P217.50 x 5,000) 1,087,500 Building (P9 x 5,000) P 45,000 Machinery (1/2) (P7.50 x 5,000) 37,500 Machinery (4/2) (P15 x 5,000) 23,000 P1,087,500 B157.500 PROBLEM NO. 3 - GATAS, INC. 1. € Cows (15,000 x P4,000) 60,000,000 Helfers (1,000 x P3,000) Fair value, Nov, 1, 2014 63,000,000 2. & Cows (15,000 x P5,000) P 75,000,000 Heifers (1,000 x P4,500) 4,500,000 Heifers (7,500 x P3,600) — 22,000,000 Fair value, Oct. 31, 2015 06,500,000 3, © Increase in fair value due to price change: Cows 15,000 x P(4,500-4,000) 7,500,000 Heifers 1,000 x P(3,200-3,000) 200,000 Heifers 7,500 x P(3,200-3,000) 1,500,000 Total ° P2,200,000 4. B_ Increase in fair value due to physical change: ‘Cows 15,000 x P{5,000-4,500) 7,500,000 Heifers 1,000 x P(4,500-3,200) 1,300,000 Heifers 7,500 x P(3,600-3,200) — 3,000,000 Total ‘P41,800,000GPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) ____AP-PW77-2-30L. 5. A Fair value of cattle in Central Visayas: ‘Cows (6,000 x P5,000) 30,000,000 Helfers (2,000 x P4,500) —9.000,000 ‘Total 39,000,000 PROBLEM NO. 4 - METEORS CORPORATION WT WT Ni Ni RE nov_{ 2013 | 2014 | 2o1s_| seats. Unadjusted Balances 60,000 | 44,000 | 52,000 | 60,000 | 216,000 1_| End Inventory - Oversiated 2013 = 115,000) |" 56,000 2014 (64,000) | 64,000 2 | End Inventory = Understated 2012 | 46,000 | 8,000) 2015 72000 | 72,000 ‘3_| Prepaid Expense Bore |__ 7,200 | 7-200 2013 5,600 | 6.600) 2014 4,000 | (4,000) 2015 4800 | 4800 ‘| Uneamed income 2013 (B20) | 3.200 2015 2.400) | 2,400) S| Accrued Expense 207g | (iiedo) | 1600 2013, (G00) | 600, 2014 Boo | 200 2015. (400) { 400) 6_| Accrued income, 207, 7,606 |_(.000) 2018 7200 | 7.200 ‘Adjusted Balances: 175,600 | (62,600) {44,400 | 796,000 | 297,200, 4-D 2-D a-A 4-c B-c PROBLEM NO. § - BONSAY/DOLORES/BORDADO 1. A Cost of Patent A 408,000 ‘Amortization, 2012-2015 (P408,000/17 x 3 10/12) (92,000) 316,000 Cost of Patent B 150,000 Amortization, 2013-2015 (P150,000/10 x 2 6/12) (37,500) 112,500 ‘Cost of Patent C P144,000 Amortization, 2014-2015 (P144,000/4 x 1 4/12) (48,000) __96,000 Total carrying value, Dec. 31, 2015 P524.500 2 4 CY of Patent B, Dec, 31, 2015 P112,500 «| 2016 amortization (P150,000/10) 45,000) CY, Dec. 31, 2016 97,500 PV of future cash flows (P20,000 x 2.5771) 51542 ; Impairment loss ‘45.958 3 CV of Patent A, Dec. 31, 2015 316,000 2016 amortization (P408,000/17) (24,000) 292,000 Patent B CV of Patent C, Dec. 31, 2015 2016 amortization (P144,000/4) 51,542 36,000 (36,000) 60,000Cost of Patent D 285,000 2016 amortization P285,000/9.5 x 6/12) (45,000) _270,000 PG73,542 Total carrying value, Dec. 31, 2016 14, © (AJEs— December 31, 2015 ‘a, Retained earnings 120,000 Patents 120,000 b, Patents 14,280 Retained earnings 14,280 ¢. Legal and professional fees expense 15,000 Deferred costs 15,000 4. Legal and professional fees expense 21,260 Liability for settlement of patent infringement suit 20,000 Accrued attorney's fees 1,260 A Patent 290,000 i Amortization (P290,000/8) (36,250) P253,750 | ‘Goodwill 240,000 i Franchise 300,000 i Amortization (P300,000/10 x 6/12) (15,000) 285,000 [Copyright 104,000 Amortization (P104,000/5 x 5/12) (8662) _ 95,333 ‘Total carrying vaiue P874,053 PROBLEM NO. 6 - TANDEM CO, 1. A Outstanding checks, Nov. 30 170,000 ‘Add: Checks issued in December: Book disbursements 407,200 Cost of checkbook (4,200) Error in recording a disbursement (P39,600 ~ P3,960) (35,640) 370,360 Total 540,360 ‘Less: Checks paid by bank: Bank disbursements 204,000 December bank service charges (1,600) Customer's retumed check (24.000) _178,400 ‘Outstanding checks, Dec, 31 361.960 2. © Depasit in transit, Nov. 30 P 80,000 ‘Add: Collections: Book receipts 735,600 ‘Note collected by bank in Navember (100,000) Note sent to the bank for collection (420,000) 515,600 Total 595,600 Less: Deposits credited by bank: Bank receipts 416,000 Correction of erroneous November charge (49,000) _376,000 Deposit in transit, Dec. 31 P219,600GPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) —AP-PW77-2-SO), Nov. 30 Receipts Disbursements Dec. 31. Book balances P157,200 735,600 407,200 P485,600 Note collected by bank in November 100,000 (100,000) Cost of checkbook (2,200) (4,200) Service charges 1,600 (1,600) Customer's returned check 24,000 (24,000) Note with bank recorded as receipt (120,000) (120,000) Overstatement of disbursement _(35,840) "35,540 ‘Adjusted book balances P256000 PSIS600 © PaaSos0 | PATS 80 Nov. 30 Receipts Disbursements Dec, 31 Bank balances 306,000 416,000 P204,000 518,000 Erroneous bank charge 40,000 (40,000) Deposits in transit ‘November 30 80,000 (80,000) December 31 219,600 219,600 Outstanding checks November 30 (470,000) (170,000) December 31 361,950 (361,960) Adjusted bank balances P2sE000 BSLEBOO © aos as0 © Baz AO 3A 4€ 5A PROBLEM NO. 7 ~ HABAGAT, INC. 1, Merchandise inventory, July 1, 2014 19,500 Retained earnings 19,500 2, Retained earings 8,100 Purchases 8,100 3. Purchases 27,900 ' Accounts payable 27,900 4, Merchandise inventory, June 30, 2015 27,900 Income summary 27,900 5, Merchandise inventory, June 30, 2015 11,100 Income summary 41,100 6. Purchases 16,200 Accounts payable 16,200 7. Accounts receivable 26,400 Sales 26,400 1. B, Inventory, July 1, 2014 (P75,000 + P19,500) 94,500 2. Di Purchases (P540,000 — P8,100 +P27,900 + P16,200) ‘P576,000 3. A Inventory, June 30, 2015 (105,000 + P27,900 +P14,100) 444.000 4. Al Accounts payable, June 30, 2015 (P27,900 + P16,200) 44,100 | |5. © Inventory, July 1, 2014 94,500 Purchasés 326,000 Goods available for sale 670,500 Inventory, June 30, 2015 (144,000) Cost of goods sold 826,500 PROBLEM NO. 8 ~ YOKE BANK 1. A Book value of loan receivable 16,500,000 Present value of projected cash flows: Dec. 31, 2014 (P5,250,000 x 0.9091) 4,772,275 Dec. 31, 2015 (P6,000,000 x 0.8264) 4,958,400 Dec. 31, 2016 (P5,250,000 x 0.7513) 3.944525 13,675,500 Loan impairment loss 22,824,500 Loan Receivable Allowance Before Current forLoan Net Loan Intorest Payment Date Payment Impairment Receivable. Income Received. Dec. 31,2014 16,500,000 2,824,500 P13,675,500 1,367,550 5,250,000 Dec. 31,2015 11,250,000 1,456,950 9,793,050 979,305 6,000,000 Dec. 31,2016 5,250,000 477,645 4,772,355 477,645 5,250,000 2. © Interest income in 2014 PL367,550 3. A Loan receivable (P:16,500,000 - P5,250,000 ~ P6,000,000) 5,250,000 Allowance for loan impairment (477,649) Carrying value, Dec. 34, 2015 P4222,355 4. D Interest income in 2015 P979,305 5. A_ Interest income in 2016 Pa77.645 —END—