Auditing and Assurance Concept and Application

Preliminary Examinations
Name:

Instruction: Please take this test like you are inside a classroom. Refrain from opening your notes/books or other
materials.
Problem 1

Anilyn Francisco is reviewing the cash accounting for ABC Corp. Anilyn’s review will focus on the petty cash fund account
and the bank reconciliation for the month ended May 31, 2021. She has collected the following information from ABC
bookkeeper for this task:

a. Petty Cash Fund

1. The petty cash fund was established on May 2, 2021 in the amount of P10,000.
2. Expenditures from the fund by the custodian as of May 31, 2021 were evidenced by approved petty cash
vouchers for the following:
i. Various office supplies 3920
ii. IOU from employees 1200
iii. Shipping charges 2298
iv. Miscellaneous expense 1526
On May 31, 2021, the petty cash fund was replenished and increased to P12,000; currency and coins in the fund
at that time totaled P756.

b. Bank Reconciliation

Bank Statement
Disbursement Receipts Balance
Balance, May 1 350,760
Deposits 1,120,000
Note payment direct from
37,200
customer (interest of 1200)
Checks cleared 1,246,000
Bank Service charge 1,080
Balance, May 31 260,880

ABC Corp Cash Account

Balance May 1, 2021 354,000
Deposits during May 1,240,000
Checks written during May 1,273,400

Deposits in transit are determined to be P120,000 and checks outstanding at May 31 total P34,000. Cash on
hand (besides petty cash) at May 31 is P9,840.

1. What is the amount of petty cash shortage?

a. 2300
b. 11244
c. 300
d. 0
 2. The journal entry to record the replenishment of, and increase in petty cash fund includes a credit to
a. Cash 10944
b. Cash 11244
c. Petty Cash Fund 10944
d. Petty Cash Fund 11244
3. What amount of cash should be reported in the May 31, 2021 statement of financial position?
a. P368,720
b. P356,720
c. P368,420
d. P358,880

Problem 2

Fernan Company’s check register shows the following entries for the month of December:
Date Checks Deposits Balance
01-Dec Beginning balance 89,300
05-Dec Deposit 65,000 154,300
07-Dec Check #14344 32,500 120,800
11-Dec Check #14345 14,000 106,800
26-Dec Deposit 49,000 155,800
29-Dec Check #14346 8,600 147,200

Fernan’s bank reconciliation for November revealed one outstanding check (no. 14343) fir P12,000 (written on
November 28) and one deposit in transit for P5,550 (made on November 29).

The following is from Fernan’s bank statement for December:

Date Checks Deposits Balance

01-Dec Beginning Balance 95,750
01-Dec Deposit 5,550 101,300
04-Dec Check #14344 32,500 68,800
05-Dec Deposit 56,000 124,800
14-Dec Check #14345 14,000 110,800
15-Dec Loan Proceed 500,000 610,800
20-Dec NSF Check 7,600 603,200
29-Dec Service Charge 1,000 602,200
31-Dec Interest 3,600 605,800
Assume that all error were committed by Fernan Company, not the bank.

Based on the preceding information, determine the following:

1. Adjusted cash balance on November 30
a. 89300
b. 95750
c. 102200
d. 101300
 2. Outstanding checks on December 31
a. 46500
b. 45500
c. 8600
d. 20600
3. Deposit in transit on December 31
a. 52600
b. 49000
c. 5550
d. 43450
4. Total bank receipts in December
a. 114000
b. 119550
c. 565150
d. 61550
5. Adjusted cash balance on December 31
a. 633200
b. 634200
c. 663800
d. 597200

Problem 3

Ion Company, organized on March 16, 2020, has a very poor internal control system. The company’s cashier is also its
accountant. After 9 months of operations, the manager suspects that the cashier-accountant has been misappropriating
company collections. You have been engaged to audit the company’s accounts to determine the extent of fraud, if any.

You started the audit on November 15. On that date, the cash on hand per your surprise count was P5,140. Also on that
date, the bank confirmed that the balance of the company’s current account was P26,328. Your examination of the
records reveals that a check for P1,852 was outstanding on November 15. The company’s markup is 40% of sales.

Further examination of the company’s records reveals the following balances at November 15, 2020:
Ordinary Share Capital 300,000
Share premium 20,000
Real property purchased for cash 200,000
Mortgage payable 80,000
Furniture and fixture (unpaid balance P6,000) 29,000
Notes payable- bank 32,000
Accounts payable- trade 46,284
Expenses paid (excluding purchases) 60,756
Merchandise inventory at cost 93,920
Accounts receivable- trade 85,380
Total sales 340,000

1. How much was paid for inventory purchases?

a. 157,716
b. 293,716
c. 183,636
d. 251,636
 2. How much was collected from customers?
a. 118,620
b. 254,620
c. 50,620
d. 340,000
3. How much is the cashier’s accountability at November 15?
a. 131,228
b. 83,228
c. 145,228
d. 151,228
4. What is the adjusted bank balance as of November 15?
a. 31,468
b. 26,328
c. 29,616
d. 23,040
5. Then cash shortage as of November 15 totaled
a. 121,612
b. 101,612
c. 127,612
d. 206,992

Problem 4

Rogelio Co. has a current account in Tagalog Bank. Your audit of the company’s cash account has revealed the following:

1. Balances taken from the company’s general ledger:

Cash balance, November 30, 2020 637,860
Cash balance, Dec 31, 2020 576,420
Receipts, Dec 1-31, 2020 306,220
2. Balances taken from the December bank statement:
Bank balance, Nov 30, 2020 685,180
Bank balance, Dec 31, 2020 637,220
Disbursement 356,080
3. Outstanding checks, Nov 30, 2020 (P26,140 was paid bank
in December) 64,140
4. Checks written and recorded in December; not included in
Checks returned with the December bank statement 36,080
5. Deposit in transit Nov 30, 2020 15,260
6. Deposit in transit Dec 31, 2020 16,140
7. A bank credit memo was issued in December to
Correct an erroneous charge mad in November 1,500
8. Note collected by bank in December (Company was
not informed of the collection) 2,060
9. A check for P2,020 (payable to a supplier) was recorded in
the check register in December as P3,000 980
10. A check for P2,240 was charged by the bank as P2,420
in December 180
 11. Rogelio Company issued a stop payment order to the
Bank in December. This pertains to a check written in
December which was not received by the payee. A new
Check was written and recorded in the check register in
December. The old check was written off by a journal entry
also in December. 780
12. Bank Service charge, Nov 30,2020 60

Questions:
1. What is the total book disbursements in December?
a. 367,660
b. 244,780
c. 369,720
d. 368,540
2. What is the total bank receipts in December?
a. 260,160
b. 308,120
c. 306,060
d. 309,020
3. What is the total outstanding checks on December 31?
a. 100,220
b. 38,000
c. 62,220
d. 74,080
4. What is the adjusted bank balance on November 30?
a. 636,300
b. 685,180
c. 637,800
d. 634,800
5. What is the adjusted book receipts in December 31?
a. 307,500
b. 306,220
c. 303,380
d. 305,440
6. What is the adjusted bank disbursement in December?
a. 353,980
b. 365,840
c. 345,960
d. 366,020
7. What is the adjusted book balance on December 31?
a. 577,500
b. 577,400
c. 576,420
d. 579,460
Problem 5
Space Jam Co. unadjusted trial balance at December 31 included the following accounts

Debit Credit
Cash 69,200
Accounts receivable 102,650
Merchandise Inventory 947,160
Accounts payable 789,715
Accrued expenses 13,214

Space Jam year-end is December 31. At the end of the year, it held its cash book open so that its statement of financial
position would show a more favorable financial condition. Your audit revealed the following items:
1. The December cash book included a January cash receipts of P65,460, of which P36,010 represents cash sales
and P29,450 represents collection from customers, net of 5% cash discounts.
2. The December check register included payments of accounts to suppliers of P37,240 on which discounts of
P1,240 were taken
3. The merchandise inventory account balance was determined by physical count on December 31.

Questions:
1. What are Space Jam’s working capital and current ratio at December 31 based on balances per company books?
Working Capital Current Ratio
a. 316,081 1.42
b. 316,081 1.39
c. 329,295 1.42
d. 329,295 1.39

2. What are Space Jam’s CORRECT working capital and current ratio at December 31?
Working Capital Current Ratio
a. 244,381 1.42
b. 278,831 1.39
c. 330,835 1.42
d. 280,381 1.39

PS: Submit it anytime of the day. JUST try to answer it within two (2) hours as this is considered a practice/preparation for the board exam Thank you and God
bless.

Prepared by: luis3ngi