PEROCHO, VINZ PATRICK E.

BSA 3

Solution: Illustrative Audit Case 20.1

Requirement A --- Analysis of Audit Findings
A. Audit of Petty Cash Fund
1) AJE 1 Accounts receivable - others 500
Cash 500

AJE 2 Operating Expenses 1000

Cash 1000

AJE 3 Prepaid expenses 2000

Cash 2000

AJE 4 Accounts receivable - others 2000

Cash 2000

B. Audit of Cash in Bank

1) AJE 5 Cash 52600
Other charges 2000
Prepaid expenses 5400
Notes Payable - current 40000
Notes Payable - noncurrent 20000

2) AJE 6 Cash in bank 5000

Accounts payable, accruals & others 5000

3) AJE 7 Cash in bank 3000

Accounts receivable - others 3000

4) AJE 8 Cash in bank 70000

Other income 70000

5) AJE 9 Accounts Receivable 80000

Cash in bank 80000

C. Audit of Accounts Receivables and Allowance for Doubtful Accounts

1) Only the customer's ledger needs to be corrected
2) AJE 10 Sales 100000
Accounts payable, accruals & others 100000

3) AJE 11 Sales 24000

Accounts Receivable 24000
AJE 12 Inventories, end 20000
Cost of sales 20000
4) AJE 13 Sales 120000
Accounts Receivable 120000
 AJE 14 Inventories, end 100000
Cost of sales 100000
5) AJE 15 Allowance for doubtful accounts 6400
Operating Expenses 6400

D. Audit of Inventories
1) No adjustment
2) AJE 16 Cost of sales 30000
Inventories, end 30000

E. Audit of Investment
1) No adjustment
2) AJE 17 Invesment in Mango Company 20000
Others charges 20000
AJE 18 Other income 304300
Investment in Mango Company 304300
AJE 19 Investment in Mango Company 110538
Other income 110538
AJE 20 Allowance for increase/decrease
in value of available-for-sale 948762
securities (long term)
Unrealized gain on available for sale 948762
securities (equity)

F. Audit of Prepaid Expenses

1) AJE 21 Prepaid expenses 23762
Operating Expenses 23762

G. Audit of equipment
1) AJE 22 Equipment 960000
Discount on notes payable 240000
Notes payable - current 1200000

2) AJE 23 Accumulated depreciation 30000

Operating expenses 30000

H. Subsequent Events
1) AJE 24 Operating expenses 13762
Retained earnings 1000000
Accounts payable, accruals & others 1013762

I. Audit of current marketable equity securities

AJE 24 Unrealized loss on current 90000
available-for-sale securities
Allowance for increase/decrease 90000
in value of current available for sale
 marketable securities

J. AJE 25 Income tax payable 68596

Provision for income tax 68596

Choco Company
Audited Statement of Financial Position
December 31, 2015

Assets
Current Assets
Cash in bank
Curent Investment in Avaiable for sale Securities at cost
Allowance for decline in value of current avaible for sale securities
Account receivable - trade
Allowance for doubtful accounts
Accounts receivable - others
Inventories
Prepaid expenses
Total current assets
Investment in Mango Company
Allowance for increase in value of availabl-for-sale securities
Land
Equipment
Accumulated depreciation
Building
Accumulated depreciation
Total assets

Liabilities and Shareholders' Equity

Accounts payable, accruals and others
Income tax payable
Notes payable - current
Discount on notes payable
Notes payable - noncurrent
Ordinary share capital
Additional paid-in capital
Unrealized gain on available for sale securities
Retained earnings
Treasury shares
Total Liabilities and Shareholder's Equity

Chico Company
Audited Statement of Comprehensive and Retained Earnings
 For the year ended December 31, 2015

Net sales 10,006,000

Cost of sales - 7,085,000
Gross profit 2,921,000
Operating Expenses - 1,179,600
Operating Income 1,741,400
Other charges - 182,000
Other income 676,238
Income before income tax 2,235,638
Provision for income tax (32%) - 693,004
Income after tax 1,542,634
Retained earnings, beg 235,400
Dividends declared - 1,000,000
Retained eranings, end 778,034
 3,545,100
890,000
- 90,000
13,936,000
- 1,393,600
499,500
9,090,000
341,162
26,818,162
4,826,238
948,762
3,000,000
3,460,000
- 1,470,000
4,000,000
- 1,000,000
40,583,162

2,768,762
907,604
1,740,000
- 240,000
6,520,000
25,000,000
2,500,000
858,762
778,034
- 250,000
40,583,162