Green Dot, Inc

Rental Expense
For the year ended December 31, 2016

Objective/s:
To test whether rental expense is accounted based in PAS17.

Procedures:
1. Obtain Lease agreement.
2. Perform independent calculation of rental expense and accrued rental based on the provisions of PAS 17.
3. Compare calculated rental expense and accrued rental against amounts recorded in the books.
4. Evaluate results and conclude.

Materiality (in PhP) 3,600,000.00

Performance materiality (in PhP) 3,240,000.00
Clearly Trivial Misstatement (in PhP) 180,000.00

Substantive Testing:
Total Rental Expense for the Year Aug. Sept. Oct. Nov.
Monthly Rental USD 20000 USD 20000 USD 20000 USD 20000
Forex Rate 44.635 43.309 43.179 47
Monthly Rental in peso ₱ 892,700.00 ₱ 866,180.00 ₱ 863,580.00 ₱ 940,000.00

The Total Rent Expense for the Year is calculated by getting the translated or converted value of the monthly rental payments by the forex rates at the end of th
considerd as rent free because according to the contract of lease the fit out rent is no longer due if the condition was met which it was as evidenced by the lack
total rent expense accordingly, as required by PAS 17, for the period would include the supposed rent for free rent. The security deposit of 43,000 however is
expense and should be recorded as an asset.

Total Rental Payments for the Year

Nov. ₱ 940,000.00
Dec. ₱ 960,000.00
Total ₱ 1,900,000.00

Total Accrued Rent

Total Rental Expense for the Year ₱ 4,522,460.00
Total Rental Payments for the Year ₱ 1,900,000.00
Accrued Rent ₱ 2,622,460.00

Issues Noted:
1. The $1,000 deposited to Making Moments, Inc. by Green Dot, Inc. a security deposit was recorded as a rental expense in the book of Green Dot, Inc
2. Green Dot, Inc. failed to accrue a liability due to the non-payment of rent during the fit out period.

Recommendation:
1. The Php43, 000 rental expense recorded by Green Dot,Inc. should be eliminated and charge as Security Deposit.
2. Accrued Rental Expenses durig the fit out period must be considered by the Green Dot, Inc. as stated in the Lease Contract.

3. The entity (Green Dot, Inc.) must properly check the recording of transactions for it will affect their Fianancial Statements, just like the security
deposit that was charged to rent expenses. There is a big difference in that for they should have an asset rather than an expense.

Proposed Entries:
Elimination of the P43, 000 recorded by Green Dot, Inc. and charged it to Security Deposit.
Recording of the Acrrued Rental Expenses during the fit out period.
 Debit Credit
Security Deposit ₱ 43,000.00
RentalExpense ₱ 43,000.00

Rental Expense ₱ 2,622,460.00

Accrued Rent ₱ 2,622,460.00
 Dec Total
USD 20000
48
₱ 960,000.00 ₱ 4,522,460.00

by the forex rates at the end of the month. The fit out rent is
h it was as evidenced by the lack of a check paying for it. The
rity deposit of 43,000 however is understandably not a rent

se in the book of Green Dot, Inc.

ments, just like the security

n expense.