Our Lady of the Pillar College-Cauayan

Cauayan City, Isabela

INTEGRATED ACCOUNTING

Name:__________________________________________
Name:____________________ ______________________ SCORE: _______________________ 

AUDITING PROBLEMS
QUIZ NO. 6

MULTIPLE CHOICE -  On a separate sheet of paper,

paper, please choose the best answer (leer of your choice) among the
choices
choices given under each of the fol
followi
lowing
ng theory quesons.
quesons. Strictly
Strictly no eras
erasures
ures on your answer sheet otherwise
otherwise
answers will be invalidated.

PROBLEM NO. 1
 You have been assigned to audit the financial statements of AYALA MERCHANTS CORPORATON
fo! the "ea!
"ea! #$%&' The com com(an
(an"" is a deale
deale!! of a((
a((lia
liance
ncess and has seve
seve!al
!al b!a
b!anch
nches
es in Met
Met!o
!o
Manila'' ts main o
Manila office
ffice is llocate
ocated
d in Ma)ati C
Cit"'
it"' You *e!
*e!e
e give
given
n b" the co
com(an"
m(an" co cont!oll
nt!olle!
e! the
unad+usted balances of the items to be included in the com(an",s statement of financial (osition
and statement
statement of income as of and fo! the "ea! ende ended
d -ecemb
-ecembe!e! .%/ #$%&' Audit find
findings
ings a!e as
follo*s0

I. AUDIT OF CASH
 A cash count *as conducted b" "ou! staff on 1anua
1anua!"!" &/ #$%2' The (ett" cash fund of P3$/$$$
maintained b" the com(an" on an im(!e
im(!est
st basis !elected a balance of P##/&4$' 5n!e(lenished
e6(enses totaled P.&/#4$ of *hich P7/4%$ (e!tains to 1anua!" #$%2'

 You *e!e fu!nished a co(" of the com(an",s ban) !econciliation statement *ith Cha!te!ed 8an) 
as follo*s0
8alance (e! ban) P#&&/779
 Add0 -e(osit in t!ansit #92/2.3
8an) debit memos &%#/&4$
Retu!ned chec) 3./$$$
Less0 Outstanding chec)s :%&9/42$;
8oo) e!!o! :&#/$$$;
8alance (e! boo)s P%/$43/$$$

 You! !evie* of the !econciliation

!econciliation statement disclosed the follo*ing0

%' Postd
Postdated
ated ch
chec)s
ec)s to
totaling
taling P
P%$&/9$$
%$&/9$$ *
*e!e
e!e in
include
cluded
d as (a!t o
off the de
de(osit
(osit iin
n t!ansit
t!ansit'' These
!e(!esent collections f!om va!ious custome!s *hose accounts have been outstanding fo! less
than th!ee months'
months' These chec)s *e!e actuall" de(osited on 1anua!" 2/ #$%2'

#' nclud
ncluded
ed in the de(o
de(osit
sit in t!ansi
t!ansitt is a chec) f!om a cust
custome!
ome! fo! P3
P3./$$$
./$$$ *hic
*hichh *as !etu!n
!etu!ned
ed
b" the ban) on -ec-ecemb
embe! e! #&/ #$%& fo! insuff
insuffici
icienc
enc"
" of funds
funds'' Thi
Thiss acc
account
ount has bee
been
n
outstanding
outstanding fo! ove! si6 mo
months'
nths' The checchec)) *as !e(lac
!e(laced
ed b" the custome
custome!! on 1anua!" %4/
#$%2'

.' The ban) deb

debited
ited the acc
account
ount of A"ala Me!
Me!chants
chants fo! P&%$
P&%$/$$$
/$$$ as (a"ment of not
notes
es (a"able
including inte!est of P%$/$$$ due on -ecembe! #3/ #$%&' This *as not !eco!d
!eco!ded
ed as of "ea!<
end'

9' A chec
chec)
) *a
*ass clea
clea!e
!ed
d b" the ba
ban)
n) as P.
P.$/
$/7$$
7$$ but *as !e
!eco
co!d
!ded
ed b" th
the
e bo
boo)
o))e
)ee(
e(e!
e! as
P%$#/7$$' This *as in (a"ment of accounts (a"able'

4' 8an) se!v

se!vice
ice cha!
cha!ges
ges tot
totaling
aling P#/&
P#/&4$
4$ *e!e not !!eco!d
eco!ded'
ed'

II. AUDIT OF ACCOUNTS RECEIVABLE AND A

ALLOWANCE
LLOWANCE FOR DOUBTFUL ACCOUNTS

1
 

t is the com(an",s (olic" to (!ovide allo*ance fo! doubtful accounts as follo*s0

Less than . months P#/4$$/73$ %=

. to 3 months 29./#$$ 4=
Ove! 3 months #&9/4$$ %$=
Total P./3%2/33$
 An anal"sis of the accounts !eceivable schedule sho*ed that seve!al long outstanding accounts
fo! mo!e than a "ea! totaling P%4#/93$ should be *!itten<off'

III. AUDIT OF MARKETABLE SECURITIES – TRADING

The com(an",s e>uit" (o!tfolio as of "ea!<end sho*ed the follo*ing0

Total Ma!)et ?alue
Sha!es Cost (e! Sha!e
8acnotan Cement &/$$$ P%$2/4$$ P%3'$$
@il<Estate %$/$$$ %74/$$$ %7'&4
onics #/9$$ 97/#$$ #9'$$
La Tondena #/$$$ 3&/$$$ #3'$$
Selecta 2/$$$ .%/3$$ %'#$
5nion 8an) %/3$$ 4$/22$ #&'4$
P4$#/%2$
The secu!ities a!e listed in the stoc) e6change' The com(an" follo*s the fai! value accounting'

IV. AUDIT OF NOTES RECEIVABLE

The note !eceivable

!eceivable amounting to P
P%/.$$/$$$
%/.$$/$$$ !e(!esents a loan g!anted
g!anted to a subsidia!"' This is
cove!ed
cove! ed b" a (!omisso!" not
note
e *ith inte!
inte!est
est at %4= (e! annum date
dated
d Novembe
Novembe!! %/ #$%&' No
inte!est has been acc!ued on the note as of -ecembe! .%/ #$%&'

 V. AUDIT OF PREPAYMENTS

P!e(aid e6(enses account consists of the follo*ing0
P!e(aid adve!tising P 39$/$$$
P!e(aid insu!ance 97$/$$$
P!e(aid !ent 9#$/$$$
5nused office su((lies .3%/$$$
P%/7%%/$$$
 A"ala Me!chants !ene*ed its cont!act *ith an adve!tising agenc" fo! the annual (!omotion as
*elll as the !eg
*el !egula!
ula! adve
adve!ti
!tiseme
sement
nt of its (!od
(!oduct
ucts'
s' t (aid a tot
total
al of P39
P39$/$
$/$$$/
$$/ P%$$/
P%$$/$$$
$$$ of 
*hich is fo! the Ch!istmas (!omot
(!omotion
ion *hile the balanc
balance
e is fo! the !egula! (!omotio
(!omotion
n and *hich
*ill !un fo! one "ea! sta!ting on August %/ #$%&' Pa"ment *as made on 1ul" #$/ #$%&/ and the
total amount *as !eflected as (!e(aid adve!tising'

The com(an" leases the main office and sto!e in Ma)ati Cit" at a monthl" !ental of P%9$/$$$'
On Novembe! 4/ #$%&/ a chec) fo! P9#$/$$$ *as issued in (a"ment of th!ee<month !ental as
(e! !ene*al
!ene*al cont!a
cont!act
ct *hich *as effec
effective
tive on Novemb
Novembe!
e! %/ #$%&' Rent
Rental
al de(osit !ema
!emained
ined at
th!ee months and is included unde! othe! assets'

The com(an",s delive!" e>ui(ment is insu!ed *ith @o!tune nsu!ance Co!(o!ation fo! a total
cove
cove!a
!age
ge of P#
P#'9
'9 mi
mill
llio
ion'
n' To
Tota
tall (a
(a"m
"men
entt mad
made e on No
Nove
vemb
mbe!e! %3/ #$
#$%&
%& fo!
fo! th
the
e !e
!ene
ne*a
*all
amounted
amount ed to P97$/$
P97$/$$$
$$ *hich cove!s the (e!i
(e!iod
od f!om Novemb
Novembe!
e! %/ #$%& to Novembe! %/ #$%2'
No ad+ustment has been made as of -ecembe! .%/ #$%&'

To ta)e advantage of volume discount !anging f!om %$= to #$=/ the com(an" bu"s office and
sto!e su((lies on a bul) basis' The staff<in<cha!ge bought su((lies *o!th P##$/$$$ on 1une %$/
#$%& and included
included the same in thei! office su((lies
su((lies invento!
invento!"'
"' As at "ea!<end
"ea!<end// unused office
su((lies amount to P%$#/4$$'
2
 

 VI. AUDIT OF INVENTORIES

 A (h"sical count of invento!ies *as conducted simultaneousl" in all sto!es on -ecembe! #7 and
#$/ #$%&' You! !evie* of the list submitted b" tthe
he accountant disclosed the follo*ing0
%' Some de
deliv
live!i
e!ies
es made in -ec
-ecemb
embe!e! #$%& hav
have
e not been inv
invoic
oiced
ed and !ec
!eco!d
o!ded
ed as of "ea!<
end' These ititems
ems had a selling (!ice of P%93/79$ *ith te!m of %4 da"s' The co!!e
co!!es(onding
s(onding
cost *as al!ead" deducted f!om the ending invento!"'
#' oods on cconsignm
onsignment
ent to A
A"ala
"ala Me
Me!chant
!chantss totali
totaling
ng P.43/
P.43/$$$
$$$ *e!
*e!e
e inclu
included
ded in th
the
e inve
invento!"
nto!"
list'
.' Some a
a((lia
((liances
nces *o
*o!th
!th P
P%.2/4$$
%.2/4$$ *e!e !eco!
!eco!ded
ded tt*ice
*ice in th
the
e inve
invento!"
nto!" list'

9' #$%2'
oo
oods
ds The
cost
costing
ing P%
P%4./2
goods 4./2$$
*e!e$$shi((ed
(u!
(u!cha
chased
sed andsu((l
b" the (a
(aid
idie!on
su((lie! on-ec
-ecemb
embe!
e! #3
-ecembe! #2/*as
@O8!ec
!eceiv
eived
ed on
shi((ing 1anu
1anua!"
(oint' a!" 9/

 VII. AUDIT OF PROPERTY, PLANT AND EQUIPMENT

The com(an"
com(an" (u!chase
(u!chased d addition
additional
al e>ui(men
e>ui(mentt *o!th P#32/$$
P#32/$$$$ on 1une .$/ #$%&' At the date
of (u!
(u!cha
chase/
se/ it inc
incu!!
u!!ed
ed the follo*
follo*ing
ing add
additi
itional
onal cos
costs
ts *hi
*hich
ch *e!
*e!e
e cha
cha!ge
!ged
d to !e(
!e(ai!
ai!ss and
maintenance account0
@!eight<in P.$/9$$
nstallation cost %./$$$
  To
Total P9./9$$

The above e>ui(ment

e>ui(ment has an estimated useful life of ten "ea!s and estimated salvage
salvage value of 
P#$/$$$' -e(!eciation fo! the above e>ui(ment has be
been
en (!ovided based on o!iginal cost'

The com(an" disca!ded some sto!e e>ui(ment on Octobe! %/ #$%&/ !ealiBing no salvage value'
The cos
costt of the
these
se e>u
e>ui(m
i(ment
ent amo
amount
unted
ed to P%34
P%34/4#
/4#$
$ *it
*ithh an acc
accumul
umulate
ated
d de(
de(!ec
!eciat
iation
ion of 
P%.2/3#$ on -ecembe! .%/ #$%&' -e(!eciation boo)ed f!om Octobe! %/ #$%& to "ea!<end *as
P%$/92$' No ent!" *as made on the dis(osal of the (!o(e
(!o(e!t"'
!t"'

 VIII. AUDIT OF ACCRUED EXPENSES

Some e6(enses fo! -ecembe! #$%& *e!e !eco!ded *hen (aid in 1anua!" #$%2 *hich included
the follo*ing0
Elect!ic bills P&./9$$
Commission of sales agents 4&/$$$
Tele(hone cha!ges 9#/4$$
Mino! !e(ai! of delive!" e>ui(ment #%/.9$
ate! bills %2/&3$
  To
Total P#%./$$$

IX. AUDIT OF LIABILITIES

 A"ala Me!chants obtained a one<"ea! loan f!om Ch
Cha!te!ed
a!te!ed 8an) amounting to P#'3 million at an
inte!est
inte!est !ate of %3= (e! annum on Octob
Octobe!
e! %/ #$%&' Acc!
Acc!ued
ued inte!
inte!est
est on this loan *as not
ta)en u( at "ea!<end'

 X. OTHER AUDIT FINDINGS

 A !evie* of the minutes of meeting sho*ed that a %$= cash dividend *as decla!ed to
sha!eholde!s of !eco!d as of -ecembe! %4/ #$%&/ (a"able on 1anua!" .%/ #$%2'

 A"ala Me!chants Co!(o!ation

5NA-15STE- TRAL 8ALANCE
-ecembe! .%/ #$%&

-ebit C!edit
Pett" cash fund P 3$/$$$
Cash in ban) %/$43/$$$

3
 

T!ading secu!ities 92./39$

 Accounts !eceivable D t!ade ./3%2/33$
 Allo*ance fo! doubtful accounts P %%$/.3$
Notes !eceivable %/.$$/$$$
nvento!ies &/#&9/7$$
P!e(aid adve!tising 39$/$$$
P!e(aid insu!ance 97$/$$$
P!e(aid !ent 9#$/$$$
Office su((lies invento!" .3%/$$$
@u!nitu!e and fi6tu!es %/#72/9$$
-elive!" e>ui(ment #/&&$/$$$
 Accumulated de(!eciation %/%&&/4$$
Othe! assets 492/$$$
 Accounts (a"able D t!ade #/.43/.#$
Notes (a"able ./.$$/$$$
 Acc!ued e6(enses %37/$9$
8onds (a"able 4/$$$/$$$
-iscount on bonds (a"able 4$$/$$$
O!dina!" sha!e ca(ital 4/9$$/$$$
Retained ea!nings &7#/%3$
Sales %./$&2/$$$
Cost of goods sold 2/$.9/$$$
O(e!ating e6(enses ./.4&/$$$
Othe! income %/94./4$$
Othe! cha!ges 3#4/#2$
P.#/
P.#/2.
2.3/
3/22
22$
$ P.
P.#/
#/2.
2.3/
3/22
22$
$

Dete!"#e t$e %&'()te&

%&'()te& *%+%#e) - t$e -+
-++-/"#0
+-/"#0 2I0#-e t%3 "!4+"%t"-#
"!4+"%t"-#)5
)5
%' Pe
Pettt" cas
ash
h ffun
und
d
 A' P.&/#4$ 8' P3$/$$$ C' P##/&4$ -' P.#/#3$

#' Cash in ban

an) 
) 
 A' P4##/34$ 8' P94$/34$ C' P%/$43/$$$ -' P#99/24$

.' T!
T!ad
adin
ing
g sec
secu!
u!it
itie
iess
 A' P9$./39$ 8' P4$#/%2$ C' P97%/#9$ -' P9&#/&$$

9' Ac
Acco
coun
unts
ts !e
!ece
ceiv
ivab
able
le
 A' P./7.3/$$$ 8' P./3%2/33$ C' P./&2./49$ -' P./3%./%9$

4' All
Allo*a
o*ance
nce fo! dou
doubtf
btful
ul a
acco
ccount
untss
 A' P%%$/.3$ 8' P%4#/39$ C' P%.$/.%3 -' P22/#%&

3' Not
Notes
es and int
inte!e
e!est
st !ec
!eceiv
eivabl
able
e
 A' P%/..%/73$ 8' P%/..#/%3$ C' P%/..#/4$$ -' P%/.$$/$$$

&' nve
nvent
nto
o!i
!ie
es
 A' P3/7.9/#$$ 8' P&/#&9/7$$ C' P&/#7$/#$$ -' P3/&2$/9$$

2' P!
P!e(
e(ai
aid
d iins
nsu!
u!an
ance
ce
 A' P997/%3& 8' P9$2/... C' P97$/$$$ -' P9#2/&4$

7' P!e(ai
aid
d !!e
ent
 A' P%9$/$$$ 8' P $ C' P9#$/$$$ -' P#2$/$$$

%$'' P!e(
%$ P!e(aid
aid adve
adve!t
!tisi
ising
ng
 A' P.#4/$$$ 8' P39$/$$$ C' P.&./..9 -' P.%4/$$$

%%'' Of
%% Offi
fice
ce su
su((
((li
lies
es in
inve
vent
nto!
o!"
"
4
 

 A' P#42/4$$ 8' P%%&/4$$ C' P.3%/$$$ -' P%$#/4$$

%#'' To
%# Tota
tall ccu!
u!!e
!ent
nt asse
assets
ts
 A' P%9/$.../3%# 8' P%./4#./233 C' P%./3&&/333 -' P%./4.&/333

%.' P!o
P!o(e!
(e!t"/
t"/ (la
(lant/
nt/ and e>u
e>ui(m
i(ment
ent
 A' P9/$32/9$$ 8' P#/7$4/##2 C' P./793/#2$ -' P./7$#/22$

%9'' Ac
%9 Accu
cumul
mulat
ated
ed de
de(!
(!ec
ecia
iati
tion
on
 A' P%/$.2/22$ 8' P%/$9%/$4$ C' P%/%&&/4$$ -' P%/%&7/3&#

%4'' Acco
%4 Accoun
unts
ts (
(a"
a"ab
able
le
 A' P#/4#4/.3$ 8' P#/9#2/.#$ C' P#/47&/.3$ -' P#/.43/.#$

%3'' n
%3 nte
te!e
!est
st (
(a"
a"ab
able
le
 A' P%$9/$$$ 8' P%3/%&2 C' P9/$$$ -' P#&/399

%&'' To
%& Tota
tall cu!
cu!!e
!ent
nt li
liab
abil
ilit
itie
iess
 A' P3/2$./&72 8' P3/%$./&72 C' P3/$49/.3$ -' P4/3$./&72

%2' Sales
 A' P%./$32/99$ 8' P%./$&2/$$$ C' P%./##9/79$ -' P%#/..7/4$$

%7'' Co
%7 Cost
st of go
good
odss ssol
old
d
 A' P2/$.9/$$$ 8' P2/#.3/#$$ C' P2/$%2/&$$ -' P2/.&9/&$$

#$'' O(
#$ O(e!
e!at
atin
ing
g e6
e6(e
(ense
nsess
 A' P9/#73/4%9 8' P./.4&/$$$ C' P9/.9%/4%9 -' P9/3#%/4%9

SOLUTION
PROBLEM 1 – AYALA MERCHANTS CORPORATION

 A-15STN 1O5RNAL ENRES

-ecembe! .%/ #$%&

%' O(e!ating e6(enses #&/&9$

Pett" cash fund #&/&9$
:P.&/#4$ D P7/4%$;

#' Accounts !eceivable :P%$&/9$$  P3./$$$; %&$/9$$

Notes (a"able &$$/$$$
@inance cost :nte!est e6(ense; %$/$$$
Othe! cha!ges :8an) se!vice cha!ges; #/&4$
 Accounts (a"able &#/$$$
Cash in ban) 2%%/%4$

.' Allo*ance fo! doubtful accounts %4#/39$

 Accounts !eceivable :*!ite<off;
:*!ite<off; %4#/39$

9' Othe! cha!ges :5n!ealiBed loss D T!ading secu!ities; %$/79$

T!ading secu!ities %$/79$
8acnotan Cement :P%3/ &/$$$; P%%#/$$$
@il<Estate :P%7'&4 6 %$/$$$; %7&/4$$
onics :P#9 6 #/9$$; 4&/3$$
La Tondena :P#3 6 #/$$$; 4#/$$$
Selecta :P%'#$ 6 2/$$$; 7/3$$
5nion 8an) :P#&'4$ 6 %/3$$; 99/$$$
Total ma!)et value/ -ec' #%/ #$%& P9&#/&$$
Ca!!"ing value/ -ec' .%/ #$%& 92./39$
5n!ealiBed loss D t!ading secu!ities P %$/79$

4' nte!est !eceivable .#/4$$

Othe! income :nte!est income; .#/4$$
:P%/.$$/$$$ 6 %4= #F%#;
5
 

3' O(e!ating e6(enses :Adve!tising e6(ense; .#4/$$$

P!e(aid adve!tising .#4/$$$
Ch!istmas (!omotion P%$$/$$$
Regula
Reg ula!! (!o
(!omot
motion
ion :P39$
:P39$/$$$
/$$$ D P%
P%$$/$
$$/$$$
$$ G P49
P49$/$$
$/$$$
$ 6 4F%#; ##4
##4/$$
/$$$
$
Total P.#4/$$$

&' O(e!ating e6(enses :Rent e6(ense; #2$/$$$

P!e(aid !ent #2$/$$$
:P9#$/$$$ 6 #F. o! P%9$/$$$ 6 #;

2' O(e!ating e6(enses :nsu!ance e6(ense; 2%/33&

P!e(aid insu!ance 2%/33&
:P97$/$$$ 6 #F%#;

7' O(e!ating e6(enses :Office su((lies e6(ense; #42/4$$

Office su((lies invento!" #42/4$$
:P.3%/$$$ D P%$#/4$$;

%$' Ac
Accounts !eceivable %93/79$
Sales %93/79$

%%' Cost of goods sold .43/$$$

nvento!ies .43/$$$

%#' Cost of goods sold %.2/4$$

nvento!ies %.2/4$$

%.' nvento!ies %4./2$$

Cost of goods sold %4./2$$

%9' -elive!" e>ui(ment 9./9$$

O(e!ating e6(enses 9./9$$

%4' O(e!ating e6(enses :-e(!eciation e6(ense; #/%&$

 Accumulated de(!eciation #/%&$
:P9./9$$F%$ 6 3F%#;

%3' Accumulated de(!eciation %$/92$

O(e!ating e6(enses :-e(!eciation e6(ense; %$/92$

%&' Accumulated de(!eciation :P%.2/3#$ D P%$/92$; %#2/%9$

Othe! cha!ges :Loss; .&/.2$
-elive!" e>ui(ment %34/4#$

%2' O(
O(e!ating e6(enses #%./$$$
 Acc!ued e6(enses #%./$$$

%7' @inance cost :nte!est e6(ense; %$9/$$$

nte!est (a"able %$9/$$$
:P#'3 million 6 %3= .F%#;

#$' Retained ea!nings 49$/$$$

-ividends (a"able 49$/$$$
:P4/9$$/$$$ 6 %$=;

#%' O(e!ating e6(enses :-oubtful accounts e6(ense; %.$/.%&

 Allo*ance fo! doubtful accounts %.$/.%&

Re>ui!ed
Pe! 8oo)s Ad+ustments Pe! Audit = Allo*ance
Less than . months P#/4$$/73$ P%93/79$
%$&/9$$ P#/&44/.$$ % P#&/44.
. to 3 months 29./#$$ 29./#$$ 4 9#/%3$
Ove! 3 months #&9/4$$ 3./$$$
  :%4#/93$; %24/$9$ %$ %2/4$9
P./3%2/33$ P./&2./49$ P22/#%&

 Allo*ance befo!e ad+ustment :P%%$/.3$ D P%4#/93$; P 9#/%$$ debit

6
 

Re>ui!ed allo*ance 22/#%&

 Ad+ustment P%.$/.%&

%' D Pett" cash fund

Pe! boo)s P3$/$$$
 A1E % :#&/&9$;
Pe! audit P.#/#3$

#' D Cash in ban) 

Pe! boo)s P%/$43/$$$
 A1E # :2%%/%4$;
Pe! audit P #99/24$

.' D T!ading secu!ities

Pe! boo)s P92./39$
 A1E 9 :%$/79$;
Pe! audit P9&#/&$$

9' C  Accounts !eceivable

Pe! boo)s P./3%2/33$
 A1E # %&$/9$$
. :%4#/93$;
%$ %93/79$
Pe! audit P./&2./49$

4' D  Allo*ance fo! doubtful accounts

Pe! boo)s P%%$/.3$
 A1E . :%4#/93$;
#% %.$/.%&
Pe! audit P 22/#%&

3' C Notes and inte!est !eceivable

Pe! boo)s P%/.$$/$$$
 A1E 4 .#/4$$
Pe! audit P%/..#/4$$

&'  A nvento!ies
Pe! boo)s P&/#&9/7$$
 A1E %% :.43/$$$;
%# :%.2/4$$;
%. %4./2$$
Pe! audit P3/7.9/#$$

2' B P!e(aid insu!ance

Pe! boo)s P97$/$$$
 A1E 2 :2%/33&;
Pe! audit P9$2/...

7'  A P!e(aid !ent

Pe! boo)s P9#$/$$$
 A1E & :#2$/$$$;
Pe! audit P%9$/$$$

%$' D P!e(aid adve!tising

Pe! boo)s P39$/$$$
 A1E 3 :.#4/$$$;
Pe! audit P.%4/$$$

%%' D Office su((lies invento!"

Pe! boo)s P.3%/$$$
 A1E 7 :#42/4$$;
Pe! audit P%$#/4$$

%#' C Pett" cash fund P .#/#3$

Cash in ban) #99/24$
T!ading secu!ities 9&#/&$$
 Accounts !eceivable :P./&2./49$ D P22/#%&; ./374/.#.
Notes and inte!est !eceivable %/..#/4$$
nvento!ies 3/7.9/#$$
P!e(aid insu!ance 9$2/...
7
 

P!e(aid !ent %9$/$$$

P!e(aid adve!tising .%4/$$$
Office su((lies invento!" %$#/4$$
Total cu!!ent assets P%./3&&/333

%.' C P!o(e!t"/ (lant/ and e>ui(ment :PPE;

Pe! boo)s P9/$32/9$$
 A1E %9 9./9$$
%& :%34/4#$;
Pe! audit P./793/#2$

%9' B  Accumulated de(!eciation

Pe! boo)s P%/%&&/4$$
 A1E %4 #/%&$

%3
%& :%:#
%$2//%
992$
$;;
Pe! audit P%/$9%/$4$

%4' B  Accounts (a"able

Pe! boo)s P#/.43/.#$
 A1E # &#/$$$
Pe! audit P#/9#2/.#$

%3'  A nte!est (a"able

Pe! boo)s P$
 A1E %7 %$9/$$$
Pe! audit P%$9/$$$

%&' C  Accounts (a"able D t!ade P#/9#2/.#$

Notes (a"able #/3$$/$$$
 Acc!ued e6(enses .2#/$9$
nte!est (a"able %$9/$$$
-ividends (a"able 49$/$$$
Total cu!!ent liabilities P3/$49/.3$

%2' C Sales
Pe! boo)s P%./$&2/$$$
 A1E %$ %93/79$
Pe! audit P%./##9/79$

%7' C Cost of goods sold

Pe! boo)s P2/$.9/$$$
 A1E %% .43/$$$
%# %.2/4$$
%./ :%4./2$$;
Pe! audit P2/.&9/&$$

#$' D O(e!ating e6(enses

Pe! boo)s P./.4&/$$$
 A1E % #&/&9$
3 .#4/$$$
& #2$/$$$
2 2%/33&
7 #42/4$$
%9 :9./9$$;
%4 #/%&$
%3 :%$/92$;
%2 #%./$$$
#% %.$/.%&
Pe! audit P9/3#%/4%9

PROBLEM NO. 6 27689 2-!4e$e#)":e5

 You have been engaged to e6amine the financial statements of 1osiah Com(an" fo! the "ea! #$%4'
The client (!ovides "ou the follo*ing info!mation given belo*0

1OSAH Com(an"
Statement of @inancial Position
@o! the Yea! ended -ecembe! .%/ #$%4

8
 

Cu!!ent Assets 49$/$$$ Cu!!ent Liabilities &.$/$$$

Long<te!m nvestments %&3/$$$ Long<te!m Liabilities .2$/$$$
P!o(e!t" Plant  E>ui(ment %/$#$/$$$ Cont!ibuted Ca(ital 44$/$$$
ntangible Assets %%./$$$ 5n!ealiBed Ca(ital %$2/$$$
Othe! Assets %.%/$$$ Retained Ea!nings #%#/$$$
Total Assets %/72$/$$$ Total Liab  E>uities %/72$/$$$

 Additional nfo!mation0
%'
%';; Cu
Cu!!
!!en
entt as
asse
sets
ts in
incl
clud
ude
e ca
cash
sh of P%P%$$
$$/$
/$$$
$$// ac
acco
coun
unts
ts !ece
!eceiv
ivab
able
le of P%
P%#$
#$/$
/$$$
$$// no
note
tess
!eceivable:Matu!it" date A(!il %/ #$%7; of P&$/$$$ and land of P#4$/$$$'
#'; Long te!m investme
investments
nts include a P43/$$
P43/$$$$ fai! value th!oug
th!oughh othe! com(!ehen
com(!ehensive
sive income
secu!ities and a P%#$/$$$ investment in Long Com(an" bonds that a!e e6(ected to be held
until thei! -ecembe! .%/ #$#% matu!it" date
.'
.';; P!
P!o(
o(e!e!t"
t" PlPlan
antt and E> E>ui
ui(m
(men
entt incl
includ
udee bu
buil
ildi
ding
ngss co
cost
stin
ing
g P3
P34$/
4$/$$$
$$$// inve
invent
nto!
o!"" cocost
stin
ing
g
P&$/$$$/ and e>ui(ment costing P.$$/$$$
9'; nt
ntang
angibl
ible
e asse
assets ts inc
includ
ludee (at
(atent
entss tha
thatt cos
costt P%%
P%%$/$$
$/$$$
$ on *hi
*hich
ch P#$
P#$/$$
/$$$$ amo!
amo!tiB
tiBati
ation
on has
accumulated/ and t!easu!" sha!es that cost #./$$$'
4'; Othe! asset
assetss include (!e(aid insu!a insu!ance
nce :*hich e6(i!
e6(i!es
es on 1ul" .%/ #$%3;/ P#9/$$$/ sining
fund fo! bond !eti!ement P&$/$$$/ and t!adema!)s that cost P4#/$$$ and on *hich P%4/$$$
amo!tiBation has accumulated'
3'; Cu!
Cu!!en
!entt liabil
liabiliti
ities
es inc
includ
lude
e acc
accoun
ounts
ts (a"
(a"abl
able
e of P#4P#4$/$
$/$$$/
$$/ bon
bonds
ds (a"
(a"abl
able
e :ma
:matu!
tu!it"
it" dat
date e
-ecembe! .%/ #$##; of P9$$/$$$ and acc!ued income ta6es (a"able of P2$/$$$'
&'; Long<te!m liabilities include acc!ued *age *agess of P%2$/$$$ and mo!tgage (a"able :*hich :*hich is due
in five e>ual annual (a"ments sta!ting -ecembe! .%/ #$%4; of P#$$/$$$'
2'; Cont!i
Cont!ibuted
buted ca(ita
ca(itall includ
include e o!dina!" sha!es :P4 (a!; P#4$/$$
P#4$/$$$ $ and (!efe!!ed
(!efe!!ed sha!es :P%$$
(a!; of P
P.
.$$/$$$'
7'; 5n!eal
5n!ealiBed
sha!esiBed ca(ital includ
of P#4/$$$/ includes
es (!emium
(!emium on bonds
on o!dina!" sha!es(a"able of P9$/$$$/
of P.$/$$$ (!emium
and un!ealiBed on (!efe!ence
(!efe!en
inc!ease ce
in value
of fai! value th!ough othe! com(!ehensive income secu!ities fo! P%./$$$'
%$';
%$'; Re
Reta
tain
ined
ed ea
ea!n
!nin
ings
gs in
incl
clud
ude
e un!
un!es
est!
t!ic
icte
tedd !et
!etai
aine
ned
d ea!
ea!ni
ning
ngss of P%
P%$4
$4/$
/$$$
$$// all
allo*
o*an
ance
ce fo
fo!!
doubtful
doubt ful accou
accounts
nts of P%#/$$$ and accumu
accumulated
lated de(!ec
de(!eciatio
iation
n on build
buildings
ings and e>ui(
e>ui(ment
ment of 
P34/$$$ and P.$/$$$ !es(ectivel"'

I5ESTONS0
8ased on the above and the !esult of "ou! audit/ ans*e! the follo*ing0
21. Ho* much is the total cu!!ent assets as of -ecembe! .%/#$%4J
a' .&#/$$$ b' .%9/$$$ c' .$#/$$$ d' #7$/$$$
22. Ho* much is the total noncu!!ent assets as of -ecembe! .%/ #$%4J
a' %/39./$
./$$$ b' %/492/$$$ c' %
%//24$/$$$ d' %/4&%/$$$

23. Ho* much is the total cu!!ent liabilities as of -ecembe! .%/ #$%4J
a' 44$/$$$ b' 74$/$$$ c' 472/$$$ d' .&$/$$$

24. Ho* much is the total noncu!!ent liabilities as of -ecembe! .%/ #$%4J
a' &2$/$$$ b' 3$$/$$$ c' 43$/$$$ d' &9$/$$$

25. Ho* much is the total sha!eholde!,s e>uit" as of -ecembe! .%/ #$%4J
a' &$$/$$$ b' %/94./$$$ c' 2$&/$$$ d' &.4/$$$

PROBLEM NO. 7 2768115

You are given the following post closing trial balance of Isaiah Compan for !ecember 31"
3 1" 2#15
Debits Credits
Cash on hand and in bank 35,000
 Accounts
 Account s receivable
receivable 240,000
 Allowance
 Allowan ce for doubtful
doubtful accounts
accounts 8,000
 Advances to emlo!ees
 Advances emlo!ees 4,800
"nterest receivable 3,000
#reaid e$enses 1%,200
&erchandise inventor! 180,000
$
 

'and 200,000
(uildin) 500,000
 Accumulated
 Accumula ted *ereciation
*ereciation + (uildin)
(uildin) 150,000
-uiment 12,000
 Accumulated
 Accumula ted *ereciation
*ereciation + e-uiment
e-uiment 5,200
/tilit! deosits 15,000
ther assets %,000
 Accounts
 Account s a!able
a!able 2%0,000
 Advances
 Advance s from customers
customers 10,000
"nterest a!able 18,000
 Accrued e$enses
e$enses 30,000
&ort)a)e #a!able %00,000
rdinar! shares 400,000
etained earnin)s 143,200
A' 1,55,!"" 1,55,!""

our e$amination of the coman!s accounts disclosed the followin) information6

1.7 "t was disclosed that )oods costin)
costin) #20,000 which
which where consi)ned
consi)ned to Annee Coman!
Coman! for 
sale at 140 above cost were recorded as sold uon shiment on 9ovember 1, 2015. he
)oods were unsold at !ear:end.
2.7 -uiment
-uiment ac-uired for #10,000
#10,000 on ;ul! 1, 2013 was sold sold for #,000 cash on ;ul!
;ul! 1, 2015.
he
he r
roce
oceeds
eds from
from the sale
sale were
were credit
credited
ed to the
the e-ui
e-uimen
mentt ac
acco
count
unt.. 9ew
9ew e-uim
e-uimenentt
urchased on ctober 1, 2015 for #20,000 was char)ed to reairs and &aintenance in error.
3.7 he coman!
coman! dereciate
dereciates s the buildin)
buildin) at 5 a !ear and the e-uiment
e-uiment at 10 a !ea !earr.
*ereciation for 2015 has not been recorded.
4.7
4.7 he
he mort)
mort)a)a)e
e a!a
a!able
ble calls
calls for
for annua
annuall a!m
a!ment
ent of #100
#100,0,000
00 on ever!
ever! ete
etembe
mberr 30.
30.
 Amorti<ations,
 Amorti<at ions, includin) interests at 12 er !ear,
!ear, were aid as due. "nterest was roerl!
accrued durin) the !ear.
5.7 *urin) the !ear,
!ear, the e$cess of the amount received
received over the ar value of the ordinar! shares
issued of #40,000 was credited to etained arnin)s. 9o dividends were declared durin)
the !ear.
!ear. he etained
etained arnin)s be)innin) balance show a credit balance of #=0,000.
%.7 (ased on ast e$erience,
e$erience, the coman! should
should aintain the allowance for doubtful
doubtful accounts
at 5 of the customers outstandin) balances.

>/"96
(ased on the above data, answer the followin)6
2%.?ow much is the unad@usted net loss in 2015
a. =3,200 b. 33,200 c. 253,200 d. 110,000

2=.?ow much is the ad@usted net loss in 2015

a. 282,250 b. 281,250 c. 28=,00 d. 280,850

28.?ow much is the ad@usted total assets as of *ecember 31, 2015

a. 1,1=%,=50 b. 1,150,150 c. 1,108,=50 d. 1,140,100

2.?ow much is the ad@usted current liabilities as of *ecember 31, 2015

a. 418,000 b. 318,000 c. 43%,000 d. 33%,000

30.?ow much is the ad@usted total shareholders e-uit! as of *ecember 31, 2015
a. 222,100 b. 240,=50 c. 214,150 d. 10,=50

PROBLEM NO. ; 2768165

1e!emiah com(an"/ manufactu!e! and deale! of a bab" a((a!el/ has not been sub+ected to audit fo!
the "ea! #$%4 and #$%9' 8ut due to the desi!e of the boa!d of di!ecto!s to evaluate com(an"
o(e!ations/ "ou! se!vices *e!e engaged to audit both "ea!s' The follo*ing balances *e!e given to
"ou fo! e6amination'
Dee!*e 71
6<1= 6<1;
Pett" cash fund #/$$$ #'$$$
Cash 2%/#$$ 3%/4$$
 Accounts !eceivable 33/%$$ .#/9$$
1#
 

nvento!ies %39/7$$ 72/4$$

P!e(aid e6(enses 4/$$$ 9/4$$
Machine!"  E>ui(ment/ at cost %94/$$$ %94/$$$
 Accounts (a"able .4/$$$ 49/%$$
 Acc!ued e6(enses ./$$$ 9/$$$
Othe! (a"ables #/$$$ #/#$$
Sha!e Ca(ital %$$/$$$ %$$/$$$
Retained Ea!nings/ beginning %2./3$$ #./9$$
Sales 9#$/$$$ .24/$$$
Cost of Sales #$./2$$ %4&/3$$
O(e!ating E6(enses &3/&$$ 37/.$$
Othe! ncome %/%$$ #/%$$

Your au%it %isclose% the following&

#$%4 #$%9
%' End
ndin
ing
g ininve
vent
nto!
o!ie
ies/
s/ (e
(e!! summ
summa! a!"/
"/ incl
includ
uded
ed item
itemss un
unde
de!! 2/4$$ 3/#$$
consignment
#' Sala!ies e6(ense that *as not acc!ued %&/.$$ %9/3$$
.' -e(
-e(osi
osits
ts made b" custo
custome!
me!ss *e!e !ec !eco!d
o!ded
ed as sale
saless du!ing the 2$$ %/&$$
"ea! cash *as !eceive
9' 5n
5nusused
ed su
su((
((li
lies
es ch
cha!
a!ge
gedd en
enti
ti!e
!el"
l" to e6e6(e
(ens
nsee in ththe
e "ea!
"ea! of  #$$ %2$
ac>uisition
4' Adv
Advance
ancess to su(
su((li
(lie!s
e!s !ec
!ecogn
ogniBe
iBedd as (u!
(u!cha
chases
ses in the "ea! cas
cash
h 9/3$$ ./#$$
is (aid
6' -elive!ies made at the end of the "ea! !eco!ded as sales the 9/$$$ #/4$$$
follo*ing "ea!
&' 8ased on the anal"sis o off acc
accounts
ounts !e !eceiva
ceivable
ble agi
aging
ng sche
schedule/
dule/ a
an
n
allo*ance of #= of accounts !eceivable must be set<u( fo! both
"ea!s
2' -e(!
-e(!eciat
eciation
ion must also be (!ovi
(!ovided
ded u using
sing %$= !ate

QUESTIONS
8ased on the above and the !esult of "ou! audit/ ans*e! the follo*ing0
31. Ad+usted
 Ad+usted sales fo! #$%9
a' .2&/4$$ b' .24/7$$ c' .24/2$$ d' .29/ #$$
32. Ad+usted
 Ad+usted sales fo! #$%4
a' 9%2/.$$ b' 9##/3$$ c' 9##/9$$ d' 9%7/%$$

33. Ad+usted
 Ad+usted cost of sales #$%9
a' %47/7$$ b' %4%/9$$ c' %3./2$$ d' %3$/3$$

34. Ad+usted
 Ad+usted cost of sales #$%4
a' #$9/&$$ b' #$#/9$$ c' #$3/%$$ d' #$#/7$$

35. Ad+usted
 Ad+usted o(e!ating e6(enses #$%4
a' 79/422 b' 74/#23 c' 79/429 d' 7#/$32

3%. Ad+usted
 Ad+usted Retained Ea!nings/ end/ -ecembe
-ecembe!! .%/ #$%9
a' %4%/&2# b' %33/.2# c' 2/9%2 d' %44/73#

3=. 8oo) ?alue of Machine!"  e>ui(ment/ -ecembe! .%/ #$%4

a' %94/$$$ b' %.$/4$$ c' %%3/$$$ d' %$2/&4$

38. Ad+usted
 Ad+usted invento!ies/ -ecembe! .%/ #$%4
a' %4$/#$$ b' %43/9$$ c' %3&/#$$ d' %39/7$$
3. Net !ealiBable ?alue of Accounts Receivable/ -ecembe! .%/ #$%9
a' .%/&4# b' .9/#$# c' .4/ 232 d' ../9%2
11
 

40.  Ad+usted net income fo! "ea! #$%4

a' %#./&%9 b' %#9/#%3 c' %#4/&%2 d' %#9/9%#

PROBLEM NO. = 2778>5

-ata !ega!ding the statement of financial (osition of 1amie Allison Co' follo*0

 ASSETS 6<1= 6<1;

Cash 4/&3$/%$7 4/$$$/$$$
T!ading Secu!ities 94$/$$$ <
 Accounts !eceivable %/#4$/$$$ 3$$/$$$
 Allo*ance fo! doubtful accounts :%3$/$$$; :9$/$$$;
nvento!ies #/#$$/$$ #/$$$/$$$
nvestment in bonds D @A at amo!tiBed cost 9/%.2/&72 9/%72/7$&
P!o(e!t" Plant and E>ui(ment %$/4#$/$$$ 7/$$$/$$$
 Accumulated -e(!eciation :./7$$/$$$; :./#$$/$$$;
@!anchise/ net 4$$/$$$ 3$$/$$$
Total ASSETS 6<,?=@,9<? 1@,1=@,9<?

L"%*"+"t"e) %#& EQUITY 

 Accounts Pa"able 9/2$$/$$$ 9/4$$/$$$
-ividends Pa"able 9$$/$$$ .$$/$$$
-efe!!ed Ta6 Liabilit" &$$/$$$ 4$$/$$$
8onds Pa"able %/$$$/$$$ <
O!dina!" sha!es/ P%$$ (a! value %%/$$$/$$$ %$/$$$/$$$
Sha!e (!emium %/#$$/$$$ %/$$$/$$$$
T!easu!" sha!es at Cost :4$$/$$$; <
Retained Ea!nings #/%42/7$& %/242/7$&
TOTAL LA8LTES AN- EI5TY  6<,?=@,9<? 1@,1=@,9<?

 Additional nfo!mation0
%'
%';; n #$
#$%4/
%4/ 1a1ami
mie
e Alli
Allison
son Co
Co'/
'/ ac>u
ac>ui!i!ed
ed t!
t!ad
adin
ingg secu
secu!i
!iti
ties
es fo!
fo! P2
P2$$/
$$/$$
$$$$ and sold
sold t!
t!ad
adin
ing
g
secu!ities costing P4$$/$$$ and P34$/$$$ cash' ON -ecembe! .%/ #$%4/ the fai! value of the
!emaining secu!ities inc!eased to P94$/$$$'
#'; On 1anua!" %/ #$%9/ 1amie Alliso
Allison
n Co'/ ac>ui!ed P9/#4
P9/#4./44#
./44# 9<"ea! bondbondss *ith a face value
of P9/$$$/$$$ and stated inte!est of %#= (e! "ea! (a"able annuall" on -ecembe! .%' The
bonds *e!e ac>ui!ed to "ield %$=' The bonds a!e to be a((!o(!iate classified as financial
asset at amo!tiBed cost'
.'
.';; On 1anu
1anua!
a!"" #/ #$#$%4
%4// 1ami
1amiee Al
Alli
liso
sonn Co
Co'' so
sold
ld an e> e>ui
ui(m
(menentt co
cost
stin
ing
g P9
P92$
2$/$
/$$$
$$ *i
*ith
th
accumulated de(!eciation of P#$$/$$$ fo! P4$$/$$$'
9'; On 1une 4/ #$% #$%4/
4/ 1amie Allis
Allison
on Co' issu
issued
ed %$/$$
%$/$$$ $ P%$
P%$$ $ (a! o!di
o!dina!
na!"
" sha!
sha!es
es fo! P%#
P%#$$ (e!
sha!e'
4'; On 1ul" %/ #$%4/ 1amie Allison Co' ac>ui!ed e>ui(ment costing P%/$$$/$$$ fo! cash'
3'; On -ecemb
-ecembe! e! .%/ #$%4/ 1amie Allsion Co'/ ac>uac>ui!ed
i!ed land b" issuing bonds (a"able
(a"able at face
value P%/$$$/$$$'
&'; 1amie Allison Co' decla!ed and (aid cash dividends fo! #$%9 and #$%4 as follo*s
De+%e& P%"& A!-(#t
#$%9 -ecembe! #$/ #$%9 @eb!ua!" #$/ #$%4 P .$$/$$$
#$%4 -ecembe! #$/ #$%4 @eb!ua!" #$/ #$%3 P 9$$/$$$

2'; At the end of "ea!/ 1amie Allison Co' T!e

T!easu!"
asu!" sha!es at a cost of P4$$/$$$'
7'; -u!ing #$%4/ 1amie Alliso
Allison
n Co' !eco
!eco!ded
!ded sales fo! the "ea! amounted to P4/$$$/$$
P4/$$$/$$$$ cost of 
goods sold of P#/$$$/$$$ and income ta6 e6(ense of P.$$/$$$ and net income of P&$$/$$$'
 Also du!ing the "ea!/ 1amie Allison Co' *!ites off an account amounting
amou nting to P#$/$$$ that *as
found to be *o!thless'
I5ESTONS0
8ased on the follo*ing data/ ans*e! the follo*ing0
12
 

41. Ho* much is the total cash collections f!om custome!s n #$%4J
a' 9/..$/$$$ b' 4/3$$/$$$ c' 9/.4$/$$$ d' 4/$$$/$$$

42. Ho* much is the total cash (aid to su((lie!s in #$%4J

a' #/#$$/$
$/$$$ b' %/7$$/$$$ c' 3/&$$/$$$ d' .$$/$$$

43. Ho* much is the net cash (!ovided b" :o! used in; o(e!ating activitiesJ
a' 23$/ %$7 b' 2$$/$$$ c'73$/ %$7 d' 7$$/$$$

44. Ho* much is the net cash (!ovided b" :o! used in; investing activitiesJ
a' :%/$
:%/$$$
$$//$$
$$$;
$; b' :4$$/$$$; c' 4
4$
$$/$
$/$$$ d' :%/:%/$
$3$
3$//%$7;
$7;

45. Ho* much is the net cash (!ovided b" :o! used in; financing activitiesJ
a' 7$$/$$$ b' :2$$/$$$; c' &$$/$$$ d' 9$$/$$$

----- end of quiz 6 -----

13