AUDITING ASSURANCE AND CONCEPTS APPLICATION 1

PROBLEM EXERCISES

A. CASH AND CASH EQUIVALENTS

1. In conenction with yopur audit of CC Corporation
for the year ended December 31, 2018, you gathered the
following information :
Current Account at Metrobank 2,000,000
Current Account BPI - 100,000
Payroll account 500,000
Foreign Bankl account -restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee's postdated checks 4,000
IOU from controller's sister 10,000
Traveler's check 50,000
Credit memo from a vendor for purchase return 20,000
Non-suffcient funds check 15,000
Money order 30,000
Petty cash fund ( P 4,000 in currency and expense
receipts for P 6,000) 10,000
Treasury Bills , due 3/30/19 purchased 12/29/18 200,000
Treasury Bills , due 1/31/19 purchased 2/118 300,000

REQUIRED : Based on the above information and the results of your audit
Compute the amount of Cash and Cash Equivalents that will be
reported December 31, 2018 (Provide a very roganized
solution)

2. Computation fo Adjusted Cash Balance

The cash account of Makati Corporaiton as of Deecmeber 31, 2018 consists
of the following:
On deposit in current account with RB Bank 900,000
Cash collection not yet deposited to the bank 350,000
A customer's check returend by the bank for insufficient fund 150,000
A check drawn by the Vice-President of the Corporation dated January 15, 2019 70,000
A check drawn by the supplier dated December 28, 2018 for goods returned by 60,000
the Corporation
A check dated May 31, 2018 drawn by the corporation against Pep Bank in
payment of customs duties . Since the importation did not materialize , the
check was returned by the customs broker. This check was an otustdanding check
in the reconciliaiton fo Pep Bank account 410,000
Petty cash fund of which P 5,000 is in currency ; P 3,600 in form of ewmployee's
IOUs and P 1,400 is supported by approved petty cash vouchers for expenses
all dated prior to closing of the books on december 31, 2018 10,000
Total 1,950,000
Less : Overdraft with PEP Bank secured by a Chattel mortgage on inventories - 300,000
Cash Balance per Ledger 1,650,000
Required: AT what amount will the Cash account appear on Decemebr 31, 2018,
Statement of Financial Position

5. Shown below is the Bank Reconciliation for AD Company for November 2017:
Balance per Bank, November 30, 2017 150,000
Add: Deposit in Transit 24,000
Total 174,000
Less : Outstanding Checks 28,000
Bank creit recorded error 10,000
38,000
Cash Balnce per Books, November 30, 2017 136,000

The Bank statement for December 2017 contains the following data:
Total depsoits 110,000
Total charges , including NSF check of P 8,000 and servcie charge of P 400 96,000
All outstanding checks on November 30, 2017 , inclduign the bank credit were
cleared in December 2017
There were otustanding check of P 30,000 and deposit in transit of P 38,000
on December 31, 2017

QUESTIONS :
1. How much is the cash balance per bank on December 31, 2017?
2. How much is the December receipts per books?
3. How much is the December disbursements per books?
4. How much is the cah balance per books on December 31, 2017?
5. Tha adjusted cash in bank balance as at December 31, 2017?

7. Victory Corporation was organized on January 15, 2017 and started operation
soon thereafter. The Company's cashier who acted also as the bookkeeper
had kept the accounting records very haphazrdly. The manager suspects him of
defalcation and engaged you to audit his account to find out the extent of
fraud , if there is any:
On November 15 when you started the examination of the accounts, you find
that the cash on hand to be P 25,700. From inquiry at the bank , it was
ascertained that the balance of the Company's bank deposit in current account
on the same date was P 131,640. Verification revealed that the check issued for
P 9,260 is not yet paid by the bank. The corporation selss at 40% above cost

Your examination of the available records disclosed the following information:

Share capital issued at par for cash 1,600,000
Real estate purchased and paid in full 1,000,000
Mortgage liability secured by real estate 400,000
Furnitures and Fixtures (gross) bought on which there is still a balance unpaid
of P 30,000 145,000
Outstanding noted due to the bank 160,000
Total amount owed to creditors on open account 231,420
Total sales 1,615,040
Total amount due from customers 426,900
 Inventory of merchandise on November 15 at cost 469,600
Expenses paid excluding purchases 303,780
REQUIRED : Compute for the following: Provide an organized solution
1. Collection from sales
2. Payments for purchases
3. Total cash disbursements
4. Unadjusted cash balance
5. Cash shortage
3. The cash account in the ledger of Pat Company had a balance
of P 844,800 as at December 31, 2018. An examinaiton of the account
however, disclosed the following :
1. The sales book was left open up to January 5, 2019 and cash sales
totaling P 120,000 were conisdered as sales in December
2. Checks of P 74,400 in payment of liabilities were prepared before
December 31, 2018, recorded in the books but not mailed or
delivered to the payees
3. Postdated checks totaling P 62,400 are being held by the cashier
as part of Cash. The company's experience shows that postdated
checks are ventually realized
4.00
4. Customer's check for P 12,000 deposited with but returned by bank
"NSF" on December 27, 2018.
5. The Cash account includes P 320,000 earmarked for the purchase
of personal computers which will soon be delivered.
Required : Compute the cash balance that should be reflected at the
Statement of Financial Position as at December 31, 2018.

4. Q Metal Company
Condensed Comparative Income Statements
For the Years Ended December 31, 2018 and 2017
2018
Net Sales 14,244,000
Cost of Goods Sold 11,156,000
Gross Profit 3,088,000.00
Expenses - 2,084,000
Net Operating Income 1,004,000.00

Additional Information :
a. All accounts receivable and accounts payable relate to trade merchandise
b. The proceeds from the notes payable were used to finance plant
expansion
c. Share capital was sold to provide additonal working capital

Required : Provide an organized solutions

1. How much is cash collected from accounts receivable , assuming all
sales are on account
2. Cash payments made on accounts payable to suppliers , assuming
that all purchases of inventory are on account
3. Cash payments for dividends
4. Cash receipts that were not provided by operations
5. Cash payments for assets that were not reflected from operations
6. Proof of Cash, Computation of Unadjusted and Adjusted Balances
In the audit of Pasig Company's cash account , you obtained the
following information:
The company's bookkeeper prepared the following bank reconciliation
as of November 30, 2017
Bank Balamce, November 30, 2017 90,800
Undeposited collections 5,000
Bank service charge 100
Bank colleciton of customer's notes (8,000)
Outstanding Checks;
Check No. 1159 P 3,000
Check No. 1767 5,000
Check No. 1915 2,000 ( 10,000)
Book Balance, November 20, 2017 P 77,900
Additional Data are given as follows:
1. Company recording for December:
Total Collections from customers P 165,000
Total checks drawn 98,000

2. Bank statement totals for December

Charges P 123,800
Credits 169,000

3. Check No 1159 dated Novermber 25, 2017 was entered as P 3,000

in payment of a voucher for P 30,000. Upon examination of the
checks returned by the bank, the actual amount of the chech was
P 30,000.

4. Check No. 2113 dated December 20, 2017 was issued to replace a
multilated check NO. 1767 whch was retiurned by the payee
Both checks were recorded in the amount drawn P 5,000 but no
entry was made to cancel check No. 1767

5. The December bank statement included a check darwn by Sipag

Company for P 1,500

6. Undeposited collections on December 31, 2017 - P 8,000

7. The service charge for December was P 150 which was charged
by the bank to another client

8. The bank collected a note receivable of P 7,000 on December 28, 2017

but the collection was not received on time to be recorded by Pasig

9. Outstanding checks drawn on December 31, 2017 were

Check No. 1767 P 5,000 Check No. 2910 P 2,300
Check No. 2856 1,300 Check No.2925 4,100
REQUIREMENTS : Provide an organized solutions for each of the following:
a. Prepare a Proof of Cash Bank Reconciliation
b. Unadjusted Cash Balance per Books as at December 31, 2017
c. Adjusted Cash Balance as at November 30, 2017
d. Adjusted book receipts for december 2017
e. Adjusted bank disbursement for December 2017
f. Adjusted Cash balance as at December 31, 2017
 2017
13,016,000
10,272,000
2,744,000.00
- 1,944,000
800,000
AUDIT OF ACCOUNTS RECEIVABLES
PROBLEM EXERCISES

1. Your audit disclosed that on December 31,

2017 , the accounts receivabel control
account of Aim Company had a balance
of P 2,865,000 . An analysis of accounts
receivable account showed the following:
1. Accounts know to be worthless 37,500
2. Advance payments to creditors on
purchase orders 150,000
3. Advances to affiliated companies 375,000
4. Customer's accounts reporting credit
balances arisign from sales return - 225,000
5. Interest receivable on bonds 150,000
6. Other trade accounts receivable-unassigned 750,000
7. Subscription receivable due in 30 days 825,000
8. Trade accounts receivable - assigned (Aim 375,000
Company's equity in assigned accounts is
P 150,000 )
9. Trade installment receiveable due i-18 months
includiing unearned finance charges P 30,000 330,000
10. Trade receivables from officers due currently 22,500
11. Trade accounts on which post-dated chaecks
are held (no entries were made on the
receipts of the checks) 75,000
TOTAL 2,865,000
QUESTIONS :
1. The trade accounts receivable as at December 31, 2017 is
2. The net current trade and other receivables as at December 31, 2017
3. How much of the foregoing will be presented as noncurrent
assets as at December 31, 2017?

2. In connection with the examination fo the financial statements of

Bukel Inc. for the year ended December 31, 2017, you were able to
obtain cewrtain informaiton during your audit of the accounts
receivable and related accounts

The Decemebr 31, 2017 balance in Accounts Receivable control

accounts is P 788,000
The only entries in the Doubtful Account Expense were
a. A credit for P 1,296 on December 2, 2017 because Company A
remitted in full the accounts charged off on Ocotber 31, 2017 and
b. A debit on December 31 for the amount of the credit to
Allowance for Doubtful Accounts
The Allowance for Aoudbtful Accounts schedule is presented below:

January 1, 2017
Ocotber 31, 2017
Uncollectibel Accounts :
Company A P1,296
Company B 3,280
Company C 1,456
December 31, 2017

An aging schedule of the accounts receivable as at December 31, 2017 is presented

Age Net Debit Balance

0 to 1 month P 372,960 1 percent
1 to 3 months 307,280 2 percent
3 to 6 months 88,720 3 percent
Over 6 months 24,000 Definitely uncollectiible P 4,000
P 8,000 is considered 50% uncollectible
There is a credit baalnce in one account the remainder is estimated to be 80% collectible
(0 to 1 month) of P 8,000, it represents an advance
on a sales contract. Also there is a credit balance
in 1 to 3 months accounts receivable of P 2,000
for which merchandise will be accepted by the
customer

The ledger Accounts have not been closed as at

December 31, 2017. Accounts Receivable control
account is not in agreement with the subsidiary
ledger. The difference cannot be located and you
decided to adjust the control account ot the
asum of subsidiaries after corrections are made.
QUESTIONS :
1. How much si the adjusted balance of Accounts
Receivable as at December 31, 2017?
2. How much is the adjusted balance of
Allowance for Doubtful Accounts as at
December 31, 2017?
3. How much is the net adjustment to Allowance
for Doubtful Accounts?
4. How much is Doubtful Accounts Expense for the
year 2017?
5. How much is the ent adjustment to Doubtful
Account expense ?
3. Cabuyao Company provides for doubtful acciunts
based 3% of credit sales. The following data
are availbale for 2017
Credit sales during 2017 21,000,000
Allowance for doubtful accounts January 1, 2017 170,000
Colelction of accounts written off in priro years 80,000
( Customer credit was reestablsihed)
Customer accounts written off as uncollectibel
during 2017 300,000
What is the balance of allowance for doubtful
accounts as at December 31, 2017?
 Debit Credit Balance
14,632

6,032 8,600
39,400 48,000

017 is presented
Amounst to which the
Allowance is to be adjusted
after adjustments and corrections
have been made

uncollectiible P 4,000
considered 50% uncollectible
nder is estimated to be 80% collectible