ReSA B43 AUD Final PB Exam - Questions, Answers - Solutions

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 43  May 2022 CPALE  22 Apr 2022  1:00 PM – 4:00 PM
AUDITING FINAL PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
1. A practitioner is engaged to provide assistance on the compilation of documents

necessary for the client to be accredited by the Department of Tourism. The
practitioner should refer to which of the following sources for professional
guidance?
I. PSAs III. PSRS
II. PSAEs IV. PSQC 1
a. I and II only c. II and IV only

b. III and IV only d. II and III only
2. The Securities Exchange Commission restrict accredited auditors from providing many
non-audit services to their audit clients. Which of the following is true for SEC-
accredited auditors?
I. They are restricted from providing internal audit outsourcing services to
audit clients.
II. There is no restriction on providing non-audit services to audit clients.
a. I only c. Both I and II
b. II only d. Neither I nor II
3. One objective of an operational audit is to:

a. determine whether the financial statements fairly present the
entity's operations.
b. evaluate the feasibility of attaining the entity's operational
objectives.
c. make recommendations for improving performance.
d. report on the entity's relative success in attaining profit
maximization.
4. Which of the following is not represented in both AASC and FRSC?
a. SEC c. PRBOA
b. BSP d. BIR
5. As per PRBOA Resolution No. 45 Series of 2020 on refresher course, the certificate
of completion as evidenced by TOR issued by qualified schools shall be valid for
_____ years from the date of completion.
a. two (2) c. one (1)
b. three (3) d. five (5)
6. To obtain reasonable assurance about whether the financial statement as a whole are
free from material misstatement, the auditor must fulfill several performance
responsibilities, including:
a. verifying that all audit work is performed by a CPA with a minimum
of three years of experience.
b. exercising professional judgment.
c. providing an opinion on the financial statements.
d. obtaining sufficient, appropriate audit evidence.
7. When assessing the risk of material misstatements in the financial statements:
a. the auditor must have an understanding of the client’s business and
industry.
b. inadequate internal control procedures will mitigate client business
risk.
c. GAAS specifies in detail how much and what type of evidence the
auditor needs to obtain.
d. company management is responsible for determining materiality levels.
8. Which of the following is an element of the CPA's quality control system that should
be considered in establishing its quality control policies and procedures?
a. Considering audit risk and materiality
b. Using statistical sampling techniques
c. Assigning personnel to engagements
d. Complying with laws and regulations
Page 1 of 20 0915-2303213 
resacpareview@gmail.com
AUDITING
ReSA Batch 43 - May 2022 CPALE Batch
22 Apr 2022  1:00 PM to 4:00 PM AUD Final Pre-Board Exam
9. According to the Code of Ethics, applying the conceptual framework requires
exercising professional judgment, remaining alert for new information and to changes
in facts and circumstances, and using the:
a. diligence of a good father of a family test.
b. reasonable and informed third party test.
c. independence test.
d. professional skepticism test.
10. A CPA firm should decline an offer to perform consulting services engagement if:
a. the proposed engagement is not accounting-related.
b. recommendations made by the CPA firm are to be subject to review by
the client.
c. acceptance would require the CPA firm to make management decisions
for an audit client.
d. the proposed engagement is tax-related.
11. With respect to the auditor's planning of a year-end examination, which of the
following statements is always true?
a. An engagement should not be accepted after the fiscal year-end.
b. An inventory count must be observed at the statement of financial
position date.
c. The client's audit committee should not be told of the specific audit
procedures that will be performed.
d. It is an acceptable practice to carry out substantial parts of the
examination at interim dates.
12. Which of the following persons is not a specialist upon whose work an auditor may
rely?
a. Actuary c. Internal auditor
b. Appraiser d. Engineer
13. This inherent risk factor arises when the required information cannot be prepared
based only on sufficiently precise and comprehensive data that is verifiable through
direct observation.
a. Change c. Subjectivity
b. Uncertainty d. Complexity
14. Statement I: The entity’s risk assessment process is an iterative process for
identifying and analyzing risks to achieving the entity’s objectives, and forms the
basis for how management or those charged with governance determine the risks to be
managed.
Statement I: Adhering to segregation of duties principle, salespersons should not
have the ability to modify product prices files or commission rates.
a. Only statement I is true. c. Both statements are true.
b. Only statement II is true. d. Both statements are false.
15. Of the following statements about internal controls, which one is least likely to
be correct?
a. No one person should be responsible for the custodial responsibility
and the recording responsibility for an asset.
b. Transactions must be properly authorized before such transactions are
processed.
c. Because of the cost-benefit relationship, a client may apply controls
on a test basis.
d. Control procedures reasonably ensure that collusion among employees
cannot occur.
16. Significant deficiencies need to be communicated to the company's audit committee
because:
a. they represent material weaknesses that allow fraud to be
perpetrated.
b. they represent significant design flaws in internal controls.
c. they represent falsification of accounting records.
d. they represent disclosure of information related to issuance of a
"going-concern" opinion.
17. Which of the following ultimately determines the specific audit procedures necessary
to provide an independent auditor with a reasonable basis for the expression of an
opinion?
Page 2 of 20 0915-2303213  resacpareview@gmail.com

AUDITING
a. the audit program
b. the auditor's judgment
c. Philippine Standards on Auditing
d. the auditor's working papers
18. Ecclesta Corporation has numerous customers. A customer file is kept on disk. Each
customer file contains the name, address, credit limit, and account balance. The
auditor wishes to test this file to determine whether credit limits are being
exceeded. The best procedure for the auditor to follow would be to:
a. develop test data that would cause some account balances to exceed
the credit limit and determine if the system properly detects such
situations.
b. request a printout of a sample of account balances so they can be
individually checked against the credit limits.
c. request a printout of all account balances so they can be manually
checked against the credit limits.
d. develop a program to compare credit limits with account balances and
print out the details of any account with a balance exceeding its
credit limit.
19. Which of the following is true of generalized audit software?
a. They can be used only in auditing on-line computer systems.
b. They can be used on any computer without modification.
c. They each have their own characteristics, which the auditor must
carefully consider before using in a given audit situation.
d. They enable the auditor to perform all manual compliance test
procedures less expensively.
20. Assume that an auditor estimated that 10,000 checks were issued during the accounting
period. If an application control that performs a limit check for each check request
is to be subjected to the auditor's test–data approach, the sample should include:
a. approximately 1,000 test items.
b. a number of test items determined by the auditor to be sufficient
under the circumstances.
c. a number of test items determined by the auditor's reference to the
appropriate sampling tables.
d. one transaction.
21. In examining cash disbursements, an auditor plans to choose a sample using systematic
selection with a random start. The primary advantage of such a systematic selection
is that population items:
a. that include irregularities will not be overlooked when the auditor
exercises compatible reciprocal options.
b. may occur in a systematic pattern, thus making the sample more
representative.
c. may occur more than once in a sample.
d. do not have to be prenumbered in order for the auditor to use the
technique.
22. Which of the following factors will result in a decrease in the sample size?
a. An increase in the extent to which the auditor’s risk assessment
takes into account relevant controls
b. An increase in the expected rate of deviation of the population to
be tested
c. An increase in the number of sampling units in the population
d. An increase in the tolerable rate of deviation
23. If accounts receivable turned over 7.1 times in 2021, as compared to only 5.6 times
in 2020, it is possible that there were:
a. unrecorded credit sales in 2021.
b. unrecorded cash receipts in 2021.
c. more thorough credit investigations made by the company in late 2021.
d. fictitious sales in 2021.
24. You are auditing the financial statements of a small rural municipality. The
receivable balances represent residents' delinquent real estate taxes. Control risk
is at the maximum. To determine the existence of the accounts receivable balances
at the balance sheet date, you would most likely:

AUDITING
a. send positive confirmation requests.
b. send negative confirmation requests.
c. examine evidence of subsequent cash receipts.
d. inspect internal records such as copies of tax invoices that had been
mailed to the residents.
25. Of the following, which is the least persuasive type of audit evidence?
a. Documents mailed by outsiders to the auditor
b. Correspondence between auditor and vendors
c. Copies of sales invoices inspected by the auditor
d. Computations made by the auditor
26. An auditor accepted an engagement to audit the 2021 financial statements of EFG
Corporation and began the fieldwork on September 30. EFG gave the auditor the 2021
financial statements on January 17, 2022. The auditor completed the fieldwork on
February 10, 2022, and delivered the report on February 16, 2022. The client's
representation letter normally would be dated:
a. December 31, 2021. c. February 10, 2022.
b. January 17, 2022. d. February 16, 2022.
27. Which of the following is not a subsequent events procedure?
a. Review available interim financial information.
b. Read available minutes of meetings of stockholders and directors.
c. Make inquiries with respect to the financial statements covered by
the auditor's previously issued report if new information has become
available during the current examination that might affect that
report.
d. Discuss with officers the current status of items in the financial
statements that were accounted for on the basis of tentative,
preliminary, or inconclusive data.
28. Which of the following best describes the auditor's responsibility for "other
information" included in the annual report to stockholders, which contains financial
statements and the auditor's report?
a. The auditor has no obligation to read the "other information."
b. The auditor has no obligation to corroborate the "other information"
but should read the "other information" to determine whether it is
materially inconsistent with the financial statements.
c. The auditor should extend the examination to the extent necessary to
verify the "other information."
d. The auditor must modify the auditor's report to state that the "other
information is unaudited" or "not covered by the auditor's report."
29. Auditors often request that the audit client send a letter of inquiry to those
attorneys who have been consulted with respect to litigation, claims, or assessments.
The primary reason for this request is to provide the auditor with:
a. an estimate of the amount of the probable loss.
b. an opinion about whether the loss is possible, probable, or remote.
c. information concerning the progress of cases to date.
d. corroborative evidential matter.
30. During an audit engagement, data are compiled and included in the audit working
papers. The working papers are:
a. a client-owned record of conclusions reached by the auditors who
performed the engagement.
b. evidence supporting financial statements.
c. support for the auditor's compliance with generally accepted auditing
standards.
d. a record to be used as a basis for the following year's engagement.
31. Statement I: When the financial statements are prepared in accordance with a
compliance framework, the auditor is not required to evaluate whether the financial
statements achieve fair presentation.
Statement II: Since auditor’s report shall always be in writing, the use of an
electronic medium for such purpose is not acceptable.

AUDITING
32. Statement I: The date of the auditor’s report informs the user of the auditor’s
report that the auditor has considered the effect of events and transactions of
which the auditor became aware and that occurred up to that date.
Statement II: Since the auditor’s opinion is provided on the financial statements
and the financial statements are the responsibility of management, the auditor is
not in a position to conclude that sufficient appropriate audit evidence has been
obtained until evidence is obtained that all the statements that comprise the
financial statements, including the related notes, have been prepared and management
has accepted responsibility for them.
33. Which of the following statements indicates a qualified opinion?
a. The financial statements do not present fairly in all material
respects the financial position, results of operations, and cash
flows in conformity with PFRS.
b. The auditor does not express an opinion on the financial statements.
c. The financial statements present fairly in all material respects the
financial position, results of operations, and cash flows in
conformity with PFRS.
d. Except for the effects of a matter, the financial statements present
fairly in all material respects the financial position, results of
operations, and cash flows in conformity with PFRS.
34. All of the following would require an emphasis of matter paragraph except for:
a. the existence of material related party transactions.
b. the lack of auditor independence.
c. important events occurring subsequent to the statement of financial
position date.
d. material uncertainties disclosed in the footnotes.
35. Statement I: When the auditor expresses a qualified or adverse opinion, communicating
other key audit matters is not anymore relevant to enhancing intended users’
understanding of the audit, and therefore the requirements to determine key audit
matters do not apply.
Statement II: A matter giving rise to a modified opinion in accordance with PSA 705
(Revised), or a material uncertainty related to events or conditions that may cast
significant doubt on the entity’s ability to continue as a going concern in accordance
with PSA 570 (Revised), are by their nature key audit matters.
PROBLEM 1:
You were assigned to audit the various cash accounts of your audit firm’s client
Gobyernong Corp. for the period ended December 31, 2021. The accountant provided you
the following lead schedule:
Petty Cash Fund (Imprest balance) P20,000

Cash in Bank – BPI Current Account No 12319812 1,254,200
Cash in Bank – BDO Current Account No.0131231 524,000
Cash Equivalents 2,350,000
Audit Note:
a. You rendered a cash count on January 4, 2022 on all cash items held by the
custodian - Atom Ortega. According to your investigation, the custodian holds
both the petty cash fund the undeposited collections. Undeposited collections
per records as of the count date was at P26,000. The amount included the
undeposited collections per records as of December 31, 2021 amounting to P18,000.
The following items were discovered during the said cash count:

AUDITING
Currencies and coins 12,500
Checks on hand:
Check No and Payor Payee
Check Date
012312 – Dec. 27 Alpha Corp. – Customer Gobyernong Corp. 8,400
120125 – Dec. 28 Delta Inc. – Customer* Gobyernong Corp. 2,600
*marked NSF by the bank
1016062 – Dec. 29 Mr. Lee (Gobyernong Atom Ortega 5,000
Corp.’s Comptroller)
151518 – Dec. 30 Gobyernong Corp. Atom Ortega 9,500
151519 – Dec. 30 Gobyernong Corp. Manila Water Corp. 12,200
521531 – Jan. 2 Oscar Co. – Customer Gobyernong Corp. 6,100
250251 – Jan. 3 Mr. Soriano (Gobyernong Atom Ortega 2,000
Corp.’s Plant Manager)
902413 – Jan. 5 Yankee Corp. – Customer Gobyernong Corp. 3,800
Unreplenished Petty Cash Vouchers
Date Remarks Amount
Dec. 30 Office repairs P900
Dec. 30 Office supplies 1,200
Jan. 4 Gasoline 600
Other Items
Unused postage stamps 200
Employee IOUs 1,000
Petty cash receipt voucher for a return of a travel expense 900
advance
Petty cash receipt voucher for collections from employees to be
donated to the Office of the Vice President for its typhoon 2,000
Odette relief operations
b. The client accountant also provided the following information regarding the bank
reconciliation statement items as of December 31, 2021:
BPI Account BDO Account
Balance per general ledger 1,254,200 524,000
Balance per bank statements ? 750,700
Note receivable collected by the bank 56,000
Interest on note receivable 5,600
Bank loan proceeds 250,000
Customer NSF Checks 2,600
Bank service charge 4,500 3,800
Bank loan payments 25,000
Undeposited Collections 18,000 0
Outstanding Checks 24,600 14,500
c. Cash equivalents included the following placements:

Six-month money market placements dated September 1, 2021 400,000
Three-month money market placements dated November 1, 2021 600,000
Debt security investments maturing March 31, 2022 500,000
purchased October 1, 2021
Debt security investments maturing February 28, 2022 280,000
purchased December 1, 2021
Equity security investments at fair market value expected 320,000
to be sold on February 28, 2022 purchased on December 1,
2021
Equity security investments at fair market value with a 250,000
mandatory redemption date on January 31, 2022 purchased
September 1, 2021
Requirements:
36. What is the petty cash shortage/overage as a result of you cash count conducted on
January 4, 2022?
a. 1,700 shortage c. 1,300 overage
b. 300 overage d. 3,700 shortage
37. What is the correct/adjusted balance of the petty cash fund as of December 31,
2021 as a result of your audit?
AUDITING
a. 20,000 c. 14,600
b. 15,200 d. 17,200
38. What is the correct/adjusted Cash in Bank BPI Account as of December 31, 2021
assuming no shortage or overage in Cash in Bank BPI Account?
a. 1,308,700 c. 1,315,300
b. 1,313,200 d. 1,311,300
39. What is the correct/adjusted Cash in Bank BDO Account as of December 31, 2021?
a. 745,200 c. 736,200
b. 749,000 d. 750,700
40. What is the adjusted cash equivalents to be reported as of December 31, 2021?
a. 1,470,000 c. 600,000
b. 1,280,000 d. 880,000
41. In rendering cash count the auditor observed that one of the items being presented
by the custodian of petty cash fund is a petty cash receipt voucher. The petty cash
receipt voucher is for a return of a travel expense advance which was initially
obtained from the petty cash fund and therefore being temporarily given back to the
custodian. Which of the following follow-up audit procedures the auditor should
perform in relation to the item noted?
a. The auditor should trace the petty cash receipt voucher to an
adjusting entry at year end debiting petty cash fund and crediting
advances to employees.
b. The auditor should trace the return of expense advance to a
subsequent deposit to the bank.
c. The auditor should ensure that the petty cash receipt voucher is
included among the valid cash items thus needing no adjustments at
year-end.
d. The auditor should trace the cash receipt voucher to the cancelled
replenishment check.
PROBLEM 2:
A Sales cut-off procedure for the audit of the financial statements of Tapat Corp.
resulted to the following information:
SALES CUT-OFF
DECEMBER ENTRIES
Delivery Receipt No. Delivery Date Invoice Price Remarks
125034 Dec. 26 9,600 FOB Destination
125035 Dec. 26 10,200 FOB Shipping Point
125036 Dec. 27 8,400 FOB Destination (In-Transit)
125037 Dec. 28 22,000 Shipped to Consignee
125039 Dec. 29 6,500 FOB Shipping Point (In-Transit)
125040 Dec, 30 8,800 FOB Shipping Point
120541 Dec. 30 7,200 Free Alongside the Vessel
JANUARY ENTRIES
Delivery Receipt No. Delivery Date Invoice Price Remarks
125042 Dec. 31 11,600 FOB Destination (In-transit)
125043 Dec. 31 8,200 FOB Shipping Point (In-transit)
125044 Jan. 2 6,600 FOB Shipping Point
125045 Jan. 2 10,000 Bill and Hold Agreement
Audit Notes:
a. Inventories of Tapat Corp. were physically counted on December 29, 2021 and
amounted to P212,000.
b. Gross profit based on Sales is at 40%. Total unadjusted sales and accounts
receivables per records were at P4,310,000 and P321,000, respectively.
c. DR. No 125037 were for goods sent to a consignee in Bulacan. Freight costs on
these goods paid by the consignee was at P3,000. Per inquiry with the consignee,
30% of these goods were still on hand as of December 31. Agreed commission rate
is at 10%.
d. DR No. 125038 were for goods delivered to a customer in Manila in December 29.
Related billing is yet to be made since the delivery receipt is yet to be
transmitted by the delivery department to the Billing department. The agreed
upon sales price as per the approved sales order however is at P12,000. The goods

AUDITING
are still in transit as of December 31 and as per the sales invoice the agreed
FOB term is FOB Manila.
e. DR No. 125045 were for goods sold on a Bill and Hold Agreement executed in
December.
Requirements:
42. What is the adjusted balance of Inventories as of December 31?
a. 201,380 c. 208,580
b. 213,500 d. 203,540
43. What is the adjusted balance of Accounts Receivables as of December 31?

a. 326,260 c. 309,660
b. 319,660 d. 328,060
44. What is the adjusted balance of Sales as of November 30?

a. 4,319,800 c. 4,303,200
b. 4,313,200 d. 4,321,600
45. What is the net adjustment to Net Income as a result of the audit?
a. 11,060 increase c. 3,860 decrease
b. 1,060 increase d. 4,760 decrease
46. In the course of your sales cut-off of a merchandising client, a subsequent month
sales journal entry which corresponds to a delivery receipt dated December, where
count of goods were conducted exactly at the balance sheet date shall:
a. Have no effect to accounts receivable, sales and understate
inventories.
b. Overstate receivables and sales and overstate inventories.
c. Understate receivables and sales and have no effect to inventories
d. Understate receivable and sales and overstate inventories.
PROBLEM 3:
In the course of your audit of the trade receivables of Angat Corp. for the fiscal
year ended September 30, 2021, you sent positive confirmation letters to a selected
sample of receivables. The confirmation replies monitor is shown below:
Customer Amount per Customer’s Audit Note

Books Reply Note
Soup Corp. P52,000 “Our records Invoice no. 120123 amounting to
shows only P18,000 was for goods delivered on
P34,000 per September 29 and were still in transit
invoice number as of the balance sheet date. Goods
120113.” were delivered FOB Suppliers’
Warehouse.
Salad Inc. 88,000 “The amount is The overstatement was due to a pricing
overstated” error in invoice no. 120100 dated July
20. The approved price per sales order
no. 90891 was at P18 per unit. The
company however, charged Salad Inc. in
the sales invoice at P22 per unit.
Cheese Co. 72,000 “The amount is The amount is for an invoice no.
ok” 120094 dated August 30 for goods
delivered on the same day FOB Shipping
Point. The sales agreement included a
provision for a two-months “service-
type warranty”. The goods would have
been sold without the warranty at
P60,000 while the two-month warranty
would have been sold separately at
P20,000,
Elbow Co. 132,000 “The amount is Elbow Co. is a consignee. The amount
ok. Out of was for invoice no. 120050 dated
6,000 units, August 5 for 6,000 units delivered on
2,200 remains the same date. Elbow Co. paid freight
on hand.” cost upon receipt of the goods at

AUDITING
P4,060. Commission rate agreed upon is
15%.
Ribbon Inc. 38,000 “Invoice no. Invoice no. 110912 dated April 10,
110912 should amounting to P12,000 has been
have been cancelled by a credit memo no. 11234
cancelled by a for sales returns dated April 23.
return.” Investigation revealed that while the
credit memo was recorded in the
general books, the same was not posted
in the subsidiary ledger.
Spaghetti 66,000 “Our cash The amount is for invoice no. 120011
Inc. advance should dated July 12. Further investigation
have covered revealed that on July 10 the company
any balances.” received P90,000 in cash advances from
Spaghetti Inc. per Official Receipt
No. 129239. The cash advance was
recorded however as cash sales.
Pesto Inc. 32,000 No reply (2 The amount is for an invoice dated
confirmation August 4, 2020 and therefore has
letters sent) already been outstanding for more than
a year. The management has approved
write-off of this amount upon the
auditor’s recommendation.
Additional information:
a. The balances per general ledger were as follows:
Accounts receivable P1,432,000
Allowance for bad debts (35,930)
b. The aging schedule prepared by the client based on the subsidiary records (before
any adjustments resulting from the confirmation monitoring) along with the
company’s estimate of the portion doubtful of collection revealed the following:
Age Amount %
Current (1-60 days) 420,000 -
61-120 days old 550,000 5%
121-180 days old 288,000 8%
More than 180 days 189,000 15%
Required:
47. What is the correct receivable balance for Cheese Co.?
a. 54,000 c. 9,000
b. 58,500 d. 63,000
48. How much is the unlocated difference between the general ledger and the subsidiary
ledger?
a. 3,000 c. 6,000
b. 9,000 d. None
49. What is the correct accounts receivable carrying value?
a. 1,247,000 c. 1,774,970
b. 1,177,970 d. 1,224,000
50. What is the correct bad debt expense for the year?
a. 69,030 c. 65,100
b. 60,100 d. 72,580
51. Which of the following is correct regarding the use of confirmation letters in an
audit of financial statements:
a. A reply from a receivable confirmation letter received from the
customer through the client is considered an invalid reply, thus
another set of confirmation letter should be sent.
b. Blank confirmation letters are usually preferred when the auditor
expects an overstatement error in the account balance.

AUDITING
c. When an auditor does not receive a reply from a customer for a
negative confirmation letter in a considerable period of time, the
auditor should send out another set of confirmation letter.
d. A positive confirmation letter is preferred over a negative
confirmation letter when the auditor, based on his past experience
with the client, expects minimal to zero errors.
PROBLEM 4:
A purchases cut-off procedure was rendered by your audit staff in line with your audit
of the financial statements of Buhay Corp. for the period ended December 31, 2021.
Inventories were physically counted on December 30 as a result, all goods received on
or before December 30 has been included in the physical count which amounted to
P541,000. Purchases and Accounts Payable balances per books were at P3,210,000 and
P657,000, respectively.
PURCHASES CUT-OFF
DECEMBER ENTRIES
Receiving Report No. Receipt Date Invoice Price Remarks
306914 Dec. 29 12,500 Received from a Consignor
306915 Dec. 30 7,600 FOB Shipping Point
306917 Dec, 31 9,700 FOB Shipping Point
306918 Dec. 31 6,100 Free Alongside the Vessel
JANUARY ENTRIES
Delivery Receipt No. Receipt Date Invoice Price Remarks
306920 Jan. 2 7,100 FOB Shipping Point
306921 Jan. 2 8,500 FOB Supplier’s Warehouse (In-
transit)
306922 Jan. 2 8,000 FOB Buyer (In-transit)
Additional Information:
Receiving report no. 306916 were for goods received on December 30. Supplier’s
invoice amounting to P5,400 is yet to be received as of the cut-off procedure date.
Required:
52. What is the adjusted balance of inventories as of December 31, 2021?
a. 565,300 c. 555,600
b. 577,800 d. 572,580
53. What is the correct accounts payable balance as of December 31, 2021?
a. 670,900 c. 658,400
b. 683,400 d. 672,580
54. Assuming that the inventories as of December 31, 2020 per the prior year audited
financial statements was at P524,500, what is the correct cost of goods sold for
the year?
a. 3,183,100 c. 3,223,900
b. 3,192,800 d. 3,170,600
55. Which of the following audit procedures would an auditor least likely be included
in an auditor’s audit program for trade payable and other accrued operating
expenses?
a. Tracing entries several days after the balance sheet date in the cash
disbursement journals to the supporting documents in an attempt to
uncover any unrecorded liabilities.
b. Tracing entries several days before and after the balance sheet date
in the purchases journal as part of his purchases and sales cut-off.
c. Sending confirmation letters to a sample of suppliers’ accounts with
significant balances as of the balance sheet date.
d. Testing reasonableness of accrued operating provision (such as
warranties) by either referring to past experience (historical
records) or industry experience (benchmarking).

AUDITING
PROBLEM 5:
You were assigned to audit the liability accounts of your audit firm’s client Lahat
Inc. as of December 31, 2021. The following lead schedule of liabilities has been
provided by the client accountant for your reference:
Accounts payable, trade P291,000
Provision for warranties 194,800
Accrued salaries expense – compensated absences 732,000
Accrued salaries expense – profit-sharing bonus 223,256
Audit notes:
a. The accounts payable, trade balance is net of a P23,000 customer advances for
goods to be delivered in January of the following year. Furthermore a cut-off
procedure for the said account balance resulted to the following information:
Purchase Journal Receiving
Entry date Report Date Amount Audit Notes
Dec. 28 Dec. 27 P7,000 FOB shipping point
Dec. 29 Dec. 28 9,000 FOB destination
Dec. 30 Dec. 30 12,000 FOB destination
Jan. 2 Dec. 31 15,000 FOB destination
Jan. 2 Jan. 2 8,000 FOB shipping point (in-transit)
Jan. 3 Jan. 2 11,000 FOB shipping point
*Inventories resulting from a physical count on December 31 amounted to
P338,000.
b. The provision for warranties was the accrued warranties in the prior year. No
reversal nor adjustments were done during the current year. Details regarding
the company’s one-year “assurance-type” warranty program are as follows:
2020 2021
Sales covered by warranty (in units) 5,200 7,500
Selling price P120 P125
Actual warranty costs spent 320,000 512,300
Additional information:
The company estimates that 60% of the units sold shall be returned for the
warranty program and that the company will incur P165 for part and labor per
unit returned. Records revealed that from the actual warranty cost spent in 2021,
P180,000 relates to 2020 sales.
c. The accrued salaries for compensated absences was the balance in the prior year.
No reversal entry nor accrual has been made for the current year. The accrual in
the previous year comprise a total of 1,220 days of accumulated and unused sick
and vacation leaves of employees as of December 31, 2020. 900 days were earned
in 2020 with the balance earned in 2019. Incidentally, employees are entitled to
a 15-day vacation and 15-day sick leave for every year of service. The company
had 30 employees (assumed employed throughout 2020 and 2021). Earned leaves are
carried over 2 years from year of grant, thereafter, unused leaves shall expire.
Records revealed that 850 days of the compensated absences were used by the
employees in 2021. From the leaves exercised in 2021, 250 days were earned in
2019. Furthermore, there has been a 10% increase in salary rate in 2021.
d. The accrued salaries for profit-sharing bonus was accrued based on 10% of the
unadjusted net income (before audit adjustments) after 25% RCIT tax and after
bonus.
Required:
56. What is the correct/adjusted inventory balance as of December 31?

a. 342,000 c. 340,000
b. 330,000 d. 346,000
57. What is the correct/adjusted balance of Accounts Payable – trade as of December

31?
a. 329,000 c. 337,000
b. 322,000 d. 314,000
AUDITING
58. What is the correct/adjusted balance of the Provision for Warranties as of
December 31?
a. 410,200 c. 390,200
b. 420,200 d. 400,200
59. What is the correct/adjusted balance of the Accrued Salaries for Compensated
Absences as of December 31?
a. 792,000 c. 780,000
b. 920,000 d. 882,000
60. What is the correct/adjusted balance of the Accrued Salaries for Profit-Sharing
Bonus as of December 31?
a. 195.202 c. 202,995
b. 200,102 d. 205,605
PROBLEM 6:
You were assigned to audit the Property, plant and equipment account of your continuing
audit client Unity Corp. for the period ended December 31, 2021. The PPE file in the
permanent working paper and in the prior year working paper included the following
schedule:
December 31, 2020 balances Debit Credit

Land 5,600,000
Office Building 9,800,000
Accumulated depreciation – OB 1,862,000
Factory Building 4,500,000
Accumulated depreciation – FB 978,750
Office Equipment 5,000,000
Accumulated depreciation – OE 1,250,000
Factory Machineries 9,000,000
Accumulated depreciation - FM 2,798,182
All assets were acquired at the inception of operations at the beginning of 2019 and
are being depreciated through the following policies:
Office Building – Double-declining balance over 20 years (10% salvage value based
on cost)
Factory Building – SYD over 15 years (10% salvage value based on cost)
Office Equipment – Straight-line method over 8 years (no salvage value)
Factory Machineries – SYD over 10 years (10% salvage value based on cost)
Transactions for 2021 were as follows:

a. An new elevator system costing P800,000 was installed on the company’s Office
Building and was completed in early January.
b. On March 31, the company traded a new factory machinery with a cash price of
P6M for one of its old Factory Machinery with an original cost of P4M. The
trade-in value agreed upon on the old machinery was at P2.2M. The company
paid the difference in cash.
c. On September 1, a piece of office equipment was sold for P2M. The office
equipment had an original cost of P3.2M. On October 31, a replacement office
equipment was acquired on installment basis. A P500,000 down-payment was made
plus a P3M note payable in three equal installments starting October 31,
2022. The interest rate appropriate for this transaction was ascertained at
10%. Installation and commissioning cost were incurred at P65,890. Estimated
decommissioning cost upon retirement was also estimated at P101,302.
Required:
61. What is the loss on trade in on March 31?
a. 425,455 c. 225,455
b. 556,364 d. 356,364
62. What is the total depreciation expense on office buildings for 2021?
a. 793,800 c. 882,689
b. 873,800 d. 880,000

AUDITING
63. What is the total depreciation expense on factory buildings for 2021?
a. 472,500 c. 405,000
b. 438,750 d. 506,250
64. What is the total depreciation expense on office equipment for 2021?
a. 491,667 c. 620,863
b. 556,250 d. 814,583
65. What is the total depreciation expense on factory machinery for 2021?
a. 1,178,482 c. 1,521,818
b. 1,636,364 d. 1,603,636
66. The auditor assigned to audit the property, plant and equipment requested a schedule
of property additions for the year as well as a schedule of repairs and maintenance
expense, which of the following is incorrect?
a. Items in the schedule of property additions shall be traced back to
the supporting documents to verify their propriety. This is necessary
to audit the completeness assertion over PPE additions.
b. Items in the schedule of repairs and maintenance shall be vouched to
the supporting documents to ascertain whether these are indeed to be
recognized as outright expense. This is necessary to audit the
occurrence assertion of the expense.
c. The audit proposition that a capitalizable cost might have been
erroneously charged as outright repairs and maintenance expense is
necessary to audit the completeness assertion of PPE additions.
d. Tracing property additions to the physical asset is necessary to
audit the existence assertion over PPE.
PROBLEM 7:
The following items were discovered in the accounting records of your audit client
Bilis Kilos Inc. as of December 31, 2021:
10% interest in equity securities of another company
acquired in January at cost. The investee company P580,000
reported total net income at P500,000 for the entire
year 2021 and declared a P200,000 cash dividends by the
end of the year. (FMV as at 12/31 at P620,000)
20% interest in equity securities of another company 250,000
acquired on July 1, 2021 at cost. The investee company
reported a total other comprehensive income at P850,000
for the year. This included a revaluation surplus in its
PPE at P500,000. The company also declared at year end
total cash dividends at P200,000.
50% interest in preference shares of another company 600,000
acquired on August 31, 2021 at cost. The investee company
reported net income at P1M for the entire year 2021. No
dividends were declared by the investee in 2021. (FMV
as at 12/31 at P650,000)
10%, 500,000 Bonds issued by another company acquired 500,000
at face value in January. These bonds were quoted at
year-end at 110. Interest on these bonds are payable
annually every December 31. Remaining term upon
acquisition is 3 years. Prevailing market rate of
interest on the acquisition date was at 10%
12%, 1M Bonds issued by another company acquired at cost 958,998
in July 1. These bonds were quoted at year-end at 98.
Interest on these bonds are payable semi-annually every
June 30 and December 31. Remaining term upon acquisition
is 2 years and 6 months. Prevailing market rate of
interest on the acquisition date was at 14%
Required:
67. Assuming that the company, elects to use the fair value option to eliminate
accounting mismatch for debt securities and irrevocably elected to report to profit
or loss (where applicable) any gains or losses on its equity securities, how much
is the total financial asset at fair market value through profit or loss to be
reported as at December 31, 2021?

AUDITING
a. 2,180,000 c. 2,800,000
b. 2,150,000 d. 3,300,000
68. Assuming that the company has a business model of holding debt securities for
contractual cash flows purposes, what is the total carrying value of investment in
financial assets at amortized cost?
a. 1,458,998 c. 966,128
b. 1,466,128 d. 1,451,868
69. Assuming that the company has a business model of holding debt securities for
contractual cash flows purposes and holding the securities available for sale for
financial flexibility purposes furthermore the company elected irrevocable to
report gains or losses (where applicable) in its equity investment to other
comprehensive income or losses, what is the unrealized holding gains/losses to be
reported in the stockholders’ equity section of the statement of financial position
as of 2021?
a. None c. 161,002 UHL
b. 153,872 UHL d. 15,272 UHG
70. What is the carrying value of any investment in associate as of December 31,
2021?
a. 380,000 c. 385,000
b. 360,000 d. 345,000
- END –
ANSWERS & SOLUTIONS/CLARIFICATIONS

1 B 26 C 51 A
2 A 27 C 52 A
3 C 28 B 53 A
4 D 29 D 54 A
5 A 30 C 55 C
6 D 31 A 56 D
7 A 32 C 57 C
8 C 33 D 58 A
9 B 34 B 59 A
10 C 35 B 60 C
11 D 36 A 61 A
12 C 37 B 62 C
13 B 38 A 63 B
14 C 39 C 64 B
15 D 40 D 65 C
16 B 41 B 66 A
17 B 42 C 67 C
18 D 43 B 68 B
19 C 44 B 69 B
20 D 45 D 70 D
21 D 46 C
22 D 47 D
23 D 48 A
24 A 49 B
25 C 50 C

AUDITING
PROBLEM 1: GOBYERNONG CORP.

36. Ans. A.
Accountability - Petty Cash Fund 20,000
Accountability - Undeposited Collections 26,000
Accountability - Return of Expense Advance 900
Accountability - Collections for charity (not in tact) 2,000
Total 48,900
Valid Supports:
Replenishment check 9,500
Customer collections checks:
12/28 from Alpha Corp. 8,400
1/2 from Oscar Co. 6,100
Accommodated checks (by the PCF)
12/29 from Mr. Lee 5,000
1/3 from Mr. Soriano 2,000
Unreplenished vouchers 2,700
Employee IOUs 1,000 47,200
Shortage 1,700
37. Ans. B.
AJE:
Expenses 2,100
Receivables 1,000
PC Shortage 1,700
Petty Cash Fund 4,800
Imprest balance 20,000

Less: Year-end Adjustment - 4,800
Adjusted/Audited Balance 15,200
Alternative Solution:
Cash items on hand as of January 4
Replenishment check 9,500
Customer collections checks:
12/28 from Alpha Corp. 8,400
1/2 from Oscar Co. 6,100
Accommodated checks (by the PCF)
12/29 from Mr. Lee 5,000
1/3 from Mr. Soriano 2,000 43,500
Items not belonging to the PCF
Undeposited collections as of Jan. 4 - 26,000
Return of expense advance - 900
Collections for charity - 2,000
Balance 14,600
PCF Expense voucher paid after Dec. 31 600
Adjusted PCF balance as of Dec. 31 15,200
38. Ans. A.
BPI ACCOUNT Per Bank Per Books
Unadjusted Balances 1,315,300 1,254,200
Undeposited Collections 18,000
Outstanding Checks - 24,600
Unrecorded bank credits
Note and interest collections 61,600
Unrecorded bank debits
NSF Checks - 2,600
Bank Service Charge - 4,500
Adjusted balances (assume no shortage) 1,308,700 1,308,700
AUDITING
39. Ans. C.
BPI ACCOUNT Per Bank Per Books
Unadjusted Balances 750,700 524,000
Undeposited Collections -
Outstanding Checks - 14,500
Unrecorded bank credits
Bank loan proceeds 250,000
Unrecorded bank debits
Bank Service Charge - 3,800
Bank loan payments - 25,000
Adjusted balances (assume no shortage) 736,200 745,200
Shortage 9,000
40. Ans. D. Cash Equiv. ST Investment

Six-month money market placement 400,000
Three-month money market placement 600,000
Debt security investment (6-months) 500,000
Debt security investment (3-months) 280,000
Equity security investment (FA at FMV) 320,000
Equity security investment (5-months 250,000
mandatory redemption date)
Total 880,000 1,470,000
41. Ans. B.
PROBLEM 2: TAPAT CORP.
Inventories AR Sales Net Income

Unadjusted balances 212,000 321,000 4,310,000
DR 125036 FOB Dest. - 8,400 - 8,400 - 8,400
DR 125036 FOB Dest. (8,400*60%) 5,040 5,040
DR 125037 Portion not yet sold (22,000*30%) - 6,600 - 6,600 - 6,600
DR 125037 (22,000*60%*30%) 3,960 3,960
DR 125037 Comission (22,000*70%)*10% - 1,540 - 1,540
DR 125037 Freight paid by consignee 900 - 3,000
DR 125037 Freight to consignee added to cost of sales
(3,000*70%) - 2,100
DR 125038 FOB Manila (12,000*60%) 7,200 7,200
DR 125040 (8,800*60%) - 5,280 - 5,280
DR 125041 (7,200*60%) - 4,320 - 4,320
DR 125043 FOBSP 8,200 8,200 8,200
DR 125043 FOBSP (8,200*60%) - 4,920 - 4,920
DR 125045 Bill and Hold 10,000 10,000 10,000

DR 125045 Bill and Hold (10,000*60%) - 6,000 - 6,000
208,580 319,660 4,313,200 - 4,760
42. Ans. C. 43. Ans. B. 44. Ans. B. 45. Ans. D.
46. Ans. C.
PROBLEM 3: ANGAT CORP.
48. Ans. A.
49. Ans. B. Per GL Per SL 1-60 days >60-120 >120-180 >180 days
Aug.-Sept. Jun-Jul Apr.-May Mar. and earlier
Unadjusted balances 1,432,000 1,447,000 420,000 550,000 288,000 189,000
Salad Inc. (88,000/22 =
4,000units*(22-18) - 16,000 - 16,000 - 16,000
Cheese Co. (see a below) (72,000
- 63,000) - 9,000 - 9,000 - 9,000
Elbow Co. (see b below) (132,000
- 67,000) - 65,000 - 65,000 - 65,000
Ribbon Inc. (unposted sales
returns) - 12,000 - 12,000
Spagetti Inc. (Advances from
Customer) - 66,000 - 66,000 - 66,000
Pesto Inc. (write-off of receivable)

AUDITING
- 32,000 - 32,000 - 32,000
Adjusted balances 1,244,000 1,247,000
Unlocated Difference 3,000
Adjusted balances 1,247,000 346,000 468,000 276,000 157,000
Required allowance in % - 5% 8% 15%
Required allowance in PhP - 69,030 - 23,400 22,080 23,550
Accounts receivable, carrying
value 1,177,970
*Cheese Co.
Allocation of Transaction price (pro-rata) FMV Pro-rata alloc. Transaction Price
Goods 60,000 75% 54,000
Service-tupe warranty 20,000 25% 18,000
80,000 72,000
47. Ans. D.
(a) Revenues recognized by September 30
Goods upon delivery on August 30 54,000
One-half of the warranty service by Sept. 30 9,000
Total Revenue/Receivable by September 30 63,000
(b) Valid sales on consignment

(132,000/6,000)*3,800 83,600
Less: Freight paid by consignee - 4,060
Commission (83,600*15%) - 12,540
Receivable from Consignee 67,000
50. Ans. C.
Required allowance for bad debt, end 69,030
Add: Write-off off AR per audit 32,000
Less: Recovery of previous write-off -
Allowance, unadjusted balance - 35,930
Bad debt expense 65,100
51. Ans. A.
PROBLEM 4: BUHAY CORP.
52. Ans. A.
53. Ans. A.
Inventories AP Purchases
Unadjusted balances 541,000 657,000 3,210,000
RR 306914 - Received from consignor - 12,500 - 12,500 - 12,500
RR 306916 - Unrecorded purchases 5,400 5,400
RR 306917 - Goods received after count date 9,700
RR 306919 - Unrecorded Dec. purch 12,500 12,500
RR 306921 - FOB Suppliers WH (in transit) 8,500 8,500 8,500
Adjusted balances 565,300 670,900 3,223,900
54. Ans. A.
Inventory, 12/31/2020 524,500
Add: Purchases 3,223,900
Cost of goods available for sale 3,748,400
Less: Inventory, 12/31/2021 - 565,300
Cost of sales 3,183,100
55. Ans. C.

AUDITING
PROBLEM 5: LAHAT INC.
56. Ans. D.
57. Ans. C.
Inventories Accounts payable

Unadjusted balances 338,000 291,000
Customer advances 23,000
Unrecorded Dec. Purchases 15,000
Purchase in-transit FOBSP 8,000 8,000
Adjusted balances 346,000 337,000
58. Ans. A.
2020 Required warranty expense (5,200u*60%)*165 514,800
Actual warranty costs spent in 2020 - 320,000
Provision for warranties, 12/31/2020 194,800
2021 Required warranty expense (7,500*60%)*165 742,500
Actual warranty costs spent in 2021 - 512,300
Balance 425,000
Less: 2020 Warranty balance (194,800 - 180,000) - 14,800
Provision for warranties, 12/31/2021 410,200
59. Ans. A.
Accumulated unused leaves, 12/31/2020 1,220
Additional leaves earned in 2021 (30*30) 900
Leaves used in 2021 - 850
Accumulated unused leaves, 12/31/2021 1,270
Leaves fro 2019 - expires (320 - 250) - 70
Accumulated unsued leaves, 12/31/2021 1,200
Mult. By: Salary rate in 2021* 660
Accrued compensated absences, 12/31/21 792,000
*Accrued compensated absences, 12/31/20 732,000

Divide by: # of days 1,220
2020 daily salary rate 600
Multiply by: 110%
2021 daily salary rate 660
60. Ans. C.
B = 10% (NI - TX - B)
TX = 25% (NI - B)
B = 10% (NI - 25% (NI-B) - B)
B = 0.075NI - 0.075B
NI = 1.075B / 0.075
NI = (1.075*223,256) / 0.075 = 3,200,000

Adjustments:
Unrecorded purchase - 15,000
Purchase in transit FOBSP - (Offsetting effect to net income)
Additional warranty provision - 215,400 (410,200 - 194,800)
Additional salaries expense for comp. abs. - 60,000 (792,000 - 732,000)
Adjusted net income 2,909,600
B = 0.075NI - 0.075B
B = 0.075(2,909,600) / 1.075 202,995

AUDITING
PROBLEM 6: UNITY CORP.

61. Ans. A.
Trade in value of asset given up
2,200,000
Carrying value
(4M*90%)(19/55)
Cost 4,000,000
Accum. Depr. as March 31, 2021
(4M*90%)(19/55) - 1,243,636
(4M*90%)*8/55*3/12 - 130,909 2,625,455
Loss on trade-in - 425,455
Selling price 2,000,000

Carrying value
Cost 3,200,000
Accum. Depr. as of Sept. 1
(3.2M*2/8) - 800,000
(3.2M/8years)*8/12 - 266,667 2,133,333
Loss on sale of equipment - 133,333
Cash price equivalent of the new office equipment:

Downpayment 500,000
Bal: 1M*2.486852 2,486,852
2,986,852
DACs 65,890
PV of future retirement cost (101,302*0.46651) 47,258
Initial cost of replacement office equipment 3,100,000
62. Ans. C.
Depreciation on office buildings (under double declining balance method over
20 years)
Carrying Value, Jan. 1 (9.8M*90%*90%) 7,938,000
Multiply by: Double declining balance rate 10% 793,800
Elevator system, Carrying value July 1 800,000

Multiply by: DD rate over remaining life (18 yrs) 11.11% 88,889
Total Depreciation Expense - Office Building 882,689
63. Ans. B.
Depreciation on factory buildings (under SYD over 15 years with
10% salvage value based on cost)
Depreciable Cost (4.5M*90%) 4,050,000
Multiply by SYD rate on the third year 13/120
Depreciation Expense - Factory Building 438,750
64. Ans. B.
Depreciation on office equipment (under SL Method over 8 years with
no salvage value)
Equipment Disposed on Sept 1
(3.2M/8years) *8/12 266,667
Equipment Purchased on Oct 31
(3.1M/8years)*2/12 64,583
Equipment balance
(1.8M/8years) 225,000
Total Depreciation Expense - Office Equipment 556,250
65. Ans. C.

AUDITING
Depreciation on factory machineries (under SYD over 10 years with
10% salvage value)
Machinery Disposed on March 31
(4M*90%)*8/55*3/12 130,909
Machinery Acquired on March 31
(6M*90%)*10/55*9/12 736,364
Machinery balance
(5M*90%)*8/55 654,545
Total Depreciation Expense - Factory Machinery 1,521,818
66. Ans. A.
PROBLEM 7: BILIS KILOS INC.

67. Ans. C.
10% interest in equity securities at FMV 620,000
50% interest in preference shares at FMV 650,000
10%, 500,000 Bonds (500,000*110%) 550,000
12%, 1M Bonds (1M*98%) 980,000
Total FA at FMV 2,800,000
68. Ans. B.
10%, 500,000 Bonds acquired at Face Value 500,000
12%, 1M Bonds at amortized cost
Acquisition cost 958,998
12/31/21 Amortization
Correct interest (958,998*7%) 67,130
Nominal interst (1M*6%) 60,000 7,130 966,128
Total FA at Amortized Cost 1,466,128
0.7129862 4.1001974
1,000,000 60,000
712,986 246,012 958,998
69. Ans. B.
10%, 500,000 Bonds (500,000*110%) 550,000
12%, 1M Bonds (1M*98%) 980,000
Total FA at FMV 2,800,000
Carrying value of equity investmetns

Amortized cost for debt securities
10%, 500,000 Bonds acquired at Face Value 500,000
12%, 1M Bonds at amortized cost 966,128 2,646,128
UNREALIZED HOLDING GAIN - OCI/L (SHE) 153,872
70. Ans. D.
20% Interest in equity security at cost 250,000
Share from net income (6 months only) (350,000*20%*6/12) 35,000
Share from revaluation surplus (500,000*20%) 100,000
Share from dividends (200,000*20%) - 40,000
Carrying Value of Investment in Associate, 12/31/21 345,000

ReSA B43 AUD Final PB Exam - Questions, Answers - Solutions

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ReSA B43 AUD Final PB Exam - Questions, Answers - Solutions

Uploaded by

Copyright:

Available Formats

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

AUDITING FINAL PRE-BOARD EXAMINATION

1. A practitioner is engaged to provide assistance on the compilation of documents

a. I and II only c. II and IV only

3. One objective of an operational audit is to:

Page 2 of 20 0915-2303213  resacpareview@gmail.com

Page 3 of 20 0915-2303213  resacpareview@gmail.com

Page 4 of 20 0915-2303213  resacpareview@gmail.com

Petty Cash Fund (Imprest balance) P20,000

Page 5 of 20 0915-2303213  resacpareview@gmail.com

c. Cash equivalents included the following placements:

Page 7 of 20 0915-2303213  resacpareview@gmail.com

43. What is the adjusted balance of Accounts Receivables as of December 31?

44. What is the adjusted balance of Sales as of November 30?

Customer Amount per Customer’s Audit Note

Page 8 of 20 0915-2303213  resacpareview@gmail.com

Page 9 of 20 0915-2303213  resacpareview@gmail.com

Page 10 of 20 0915-2303213  resacpareview@gmail.com

56. What is the correct/adjusted inventory balance as of December 31?

57. What is the correct/adjusted balance of Accounts Payable – trade as of December

December 31, 2020 balances Debit Credit

Transactions for 2021 were as follows:

Page 12 of 20 0915-2303213  resacpareview@gmail.com

Page 13 of 20 0915-2303213  resacpareview@gmail.com

ANSWERS & SOLUTIONS/CLARIFICATIONS

Page 14 of 20 0915-2303213  resacpareview@gmail.com

PROBLEM 1: GOBYERNONG CORP.

Imprest balance 20,000

40. Ans. D. Cash Equiv. ST Investment

PROBLEM 2: TAPAT CORP.

Inventories AR Sales Net Income

DR 125045 Bill and Hold 10,000 10,000 10,000

PROBLEM 3: ANGAT CORP.

Page 16 of 20 0915-2303213  resacpareview@gmail.com

(b) Valid sales on consignment

PROBLEM 4: BUHAY CORP.

Page 17 of 20 0915-2303213  resacpareview@gmail.com

Inventories Accounts payable

*Accrued compensated absences, 12/31/20 732,000

NI = (1.075*223,256) / 0.075 = 3,200,000

Page 18 of 20 0915-2303213  resacpareview@gmail.com

PROBLEM 6: UNITY CORP.

Selling price 2,000,000

Cash price equivalent of the new office equipment:

Elevator system, Carrying value July 1 800,000

Page 19 of 20 0915-2303213  resacpareview@gmail.com

PROBLEM 7: BILIS KILOS INC.

Carrying value of equity investmetns

Page 20 of 20 0915-2303213  resacpareview@gmail.com

You might also like