MASTERY CLASS IN

Auditing Problems
Mr. Brian Christian S. Villaluz, CPA
Problem 10
 No. 1
Net proceeds (75T - 3,750) 71,250.00
CV, 1/1/2018 52,800.00 Cost 132,000.00
Gain (loss) on sale 18,450.00 Less: A/D, 1/1/2018 (79,200.00) 2015 Depr. Exp. (132T/5) 26,400.00
CV, 1/1/2018 52,800.00 2016 Depr. Exp. 26,400.00
2017 Depr. Exp. 26,400.00
A/D, 1/1/2018 79,200.00
 No. 2
Net proceeds 24,000.00
CV, 10/1/2019 6,000.00 Cost 120,000.00
Less: A/D, 10/1/2019 (114,000.00) 2015 Depr. Exp. (120T/5) 24,000.00
Gain (loss) on sale 18,000.00 2016 Depr. Exp. 24,000.00
CV, 10/1/2019 6,000.00
2017 Depr. Exp. 24,000.00
2018 Depr. Exp. 24,000.00
2019 Depr. Exp. (24T x 9/12) 18,000.00
A/D, 10/1/2019 114,000.00
 No. 3
Trade-In Allowance 129,000.00
CV, 6/30/2017 78,600.00 Cost 157,200.00
Gain (loss) on trade-in 50,400.00 Less: A/D, 6/30/2017 (78,600.00) 2015 Depr. Exp. (157,200/5) 31,440.00
CV, 6/30/2017 78,600.00 2016 Depr. Exp. 31,440.00
2017 Depr. Exp. (31,440 x 6/12) 15,720.00
A/D, 6/30/2017 78,600.00
No. 4
Eqpt. A -
Eqpt. B 18,000.00
Eqpt. C -
Eqpt. D (186T/5) 37,200.00
Eqpt. E (235,200/5) 47,040.00
Eqpt. F (279T/5) 55,800.00
Depr. Exp. - 2019 158,040.00
No.5
Eqpt. A Eqpt. B Eqpt C Eqpt D Eqpt. E Eqpt. F Total
Cost 186,000.00 235,200.00 279,000.00 700,200.00
A/D, 12/31/2019 (158,100.00) (164,640.00) (139,500.00) (462,240.00)
CV, 12/31/2019 27,900.00 70,560.00 139,500.00 237,960.00

Eqpt D Eqpt. E Eqpt. F

2015 9,300.00
2016 37,200.00 23,520.00
2017 37,200.00 47,040.00 27,900.00
2018 37,200.00 47,040.00 55,800.00
2019 37,200.00 47,040.00 55,800.00
A/D, 12/31/2019 158,100.00 164,640.00 139,500.00
Problem 11
No. 1
Cost 444,000.00
Amortization-2014 (444T/10) 44,400.00
Unamortized Cost, 12/31/14 399,600.00
No. 2
Cost 252,000.00
Accum. Amort, 12/31/2014 47,250.00
Unamort. Cost, 12/31/14 204,750.00
No. 3
Franchise Amortization – 2013 15,750.00
Amortization of advance payment on lease – 2013 [(168T/2)x3/12] 21,000.00
Net loss including organization costs 96,000.00
132,750.00
No. 4
Patent Amortization – 2014 44,400.00
Franchise Amortization – 2014 31,500.00
Expired portion of prepaid lease (168T/2) 84,000.00
Cost of developing secret formula 450,000.00
Legal fees 75,900.00
R&D cost 960,000.00
1,645,800.00
No. 5
Intangible assets, per client 4,116,300.00
Advance lease payment (168,000.00)
Net loss 2013 incl. organization costs (96,000.00)
Cost of developing secret formula (450,000.00)
Legal fees for successful defense (75,900.00)
R&D Costs (960,000.00)
Franchise accumulated amortization, 12/31/2014 (47,250.00)
Patent accumulated amortization, 12/31/2014 (44,400.00)
Intangible assets, 12/31/2014 2,274,750.00
Problem 12
No. 1
A/P per ledger 2,720,000.00
Suppliers' debit balance 120,000.00
a -
b 96,000.00
c (72T x 2/3) 48,000.00
d (33,600 x 15/30) 16,800.00
Purch. Returns (80,000.00)
Trade & other payables 2,920,800.00
No. 2
Accr. Salaries and wages 1,164,000.00
Inc. tax withheld 84,000.00
SSS contr. 96,000.00
Pag IBIG contributions 9,000.00
PhilHealth contributions 15,000.00
Advances to employees -
1,368,000.00
No. 3
Current portion 960,000.00
Add: Accr. Int. (1.92M x 18% x 3/12) 86,400.00
1,046,400.00
No. 4
Warranty liability, 1/1/19 416,000.00
Warranty expense-2019 1,504,000.00
Warranty claims honored - 2018 (396,000.00)
Warranty claims honored - 2019 (992,000.00)
Warranty claims expired – 2018 (20,000.00)
Warranty liability, 12/31/19 512,000.00
No. 5
Premium liability, beg. - # of premium items to be distributed
(160T coupons x 60%)/5 coupons per premium item 19,200
Add: Premium Exp. 1,728,000
X: Net cost per premium item (100 + 20 – 30) 90
Less: Premiums distributed (1,152,000)
Premium expense – 2019 1,728,000
Premium liability, end 576,000
# of premium items distributed (64T/5) 12,800

X: Net cost per premium item 90

Net cost of premiums distributed 1,152,000

Premium Exp. = # of premium items expected to be distributed x Net cost per premium item

Purchase price per premium item xx

# of coupons expected to be redeemed Add: Other costs xx
# of premium items expected to be distributed = xx
# of coupons per premium item
Less: Customer remittance per premium item (xx)
Net cost per premium item xx

# of coupons expected to be redeemed = # of coupons issued during the period x Expected % to be redeemed
Problem 13
No. 1
Date Payment Interest expense Payment applied to principal CV of lease liability
12/31/2018 1,311,600.00
12/31/2019 375,000.00 236,088.00 138,912.00 1,172,688.00
No. 2
Bonds payable, 4/1/19 3,502,838.00
Int. Exp. (3,502,838 x 7.5% x 9/12) 197,034.64
Int. Accr. (3M x 10% x 9/12) (225,000.00)
Bonds payable, 12/31/19 3,474,872.64
 Date Payment Interest expense Payment applied to principal CV of lease liability
12/31/2018 1,311,600.00

No. 3 12/31/2019 375,000.00

12/31/2020 375,000.00
236,088.00
211,083.84
138,912.00
163,916.16
1,172,688.00
1,008,771.84

Notes payable - bank 900,000.00

Fin. lease liability - noncurrent portion 1,008,771.84
NP-Supplier -
Bonds payable - noncurrent portion 3,474,872.64
NCL, 12/31/19 5,383,644.48
No. 4
NP-bank current portion 450,000.00
Fin. lease liability - current portion 163,916.16
NP-Suppl. 750,000.00
Bonds payable - current portion -
Current portion 12/31/19 1,363,916.16
No. 5 Int. Exp. – 1/1-4/30 (1.8M x 10% x 4/12) 60,000
Int. Exp. – 5/1 – 12/31 (1.35M x 10% x 8/12) 90,000
Int. on NP-bank 150,000.00 Int. Exp. – 2019 150,000
Int on FLL 236,088.00
Int on NP-Suppl. 71,250.00
Int on BP 197,034.64
Int Exp. 2019 654,372.64
Problem 14
 Analysis
OS SP-OS SP-TS PS SP-PS RE TS-OS
Prior to 2018 - Ord. shares
Bullet #1 7,600,000.00 15,960,000.00
Bullet #2 400,000.00 1,360,000.00
Bullet #3 800,000.00 2,560,000.00
Bullet #4 (264,000.00)
2018 - Ord. shares
Bullet #1 (264,000.00)
Bullet #2 160,000.00 576,000.00
Bullet #3 624,000.00
Bullet #4 440,000.00 1,848,000.00 (2,288,000.00)
2019 - Ord. shares 12,000.00 (156,000.00)
Prior to 2018 - Pref. shares
Bullet #1 10,000,000.00 7,600,000.00
Bullet #2 (400,000.00)
2018 - Pref. shares
Bullet #1 (400,000.00)
Bullet #2 (400,000.00)
6/30/2019 9,400,000.00 22,304,000.00 12,000.00 10,000,000.00 7,600,000.00 468,000.00
No. 4
RE, 6/30/2018 5,520,000.00
Stock dividends - 12/31/18 (2,288,000.00)
Dividends on PS - 12/15/18 (400,000.00)
NI-7/1/18-6/30/19 320,000.00
RE, 6/30/2019 3,152,000.00
Sinking fund requirement (400,000.00)
Appropriation for TS (468,000.00)
Unrestr. RE 2,284,000.00
No. 5
Total Contr. Cap. 49,316,000.00
Ret. Earnings 3,152,000.00
OCI -
Treas. Shares (468,000.00)
Total SHE 52,000,000.00
Problem 15
 No. 1
Reported net income 600,000.00
Gain on sale - trading sec. 300,000.00
Bonus expense (60,000.00)
Gain on sale - prop. 46,000.00
Correct. NI 886,000.00
No. 2
RE, 1/1/19 400,000.00
Dividends-OS (100,000.00)
Dividends-PS (80,000.00)
Prior period error correction (30,000.00)
Correct NI 886,000.00
RE, 12/31/19 1,076,000.00
Appropriations for bond redemption (40,000.00)
Unrestricted RE 1,036,000.00
No. 3
SP, 1/1/19 200,000.00
Gain on sale of own shares 24,000.00
Net Gain - TS (56T-50T) 6,000.00
Donation 104,000.00
SP, 12/31/19 334,000.00
End of Mastery Class
Thank you for listening!!!