CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

AUDITING BATCH 93
SOLUTIONS TO FINAL PREBOARD EXAMINATION

1. C 6. C 11. A 16. A 21. C 26. B 31. D

2. B 7. D 12. A 17. A 22. A 27. A 32. D
3. C 8. B 13. D 18. B 23. D 28. B 33. C
4. D 9. C 14. C 19. B 24. D 29. C 34. C
5. B 10. A 15. A 20. D 25. B 30. C 35. C

36. B 41. D 46. D

37. B 42. D 47. C
38. C 43. C 48. C
39. B 44. D 49. A
40. D 45. D 50. B

Situation 1 – MALABON COMPANY

51. B Net purchases – December (P2,352,000 – P2,077,500) P274,500

UP TO
NOV. 30 DEC. 31
Per books P2,160,000 P2,430,000
November purchase recorded in December 30,000 --
October deposits recorded as purchases (42,000) (42,000)
Defective items returned (15,000) (36,000)
December purchase recorded in November (55,500) --
Per audit P2,077,500 P2,352,000
52. A Per count P675,000
Items duplicated (9,000)
In transit – purchased under FOB Destination term (55,500)
Items counted but not included in list 21,000
Overvaluation – extension errors (12,000)
Adjusted balance P619,500
53. C Sales P2,400,000
Cost of sales:
Inventory, Jan. 1 P 270,000
Net purchases 2,077,500
Goods available for sale 2,347,500
Inventory, Nov. 30 (619,500) 1,728,000
Gross profit P 672,000
54. D Cost of sales ratio (P1,728,000/P2,400,000) 72%
55. C Inventory, November 30 P619,500
December net purchases 274,500
Goods available for sale 894,000
Cost of goods sold (P450,000 – P60,000 = P390,000 X 72% = P280,800 + P60,000) (340,800)
Estimated inventory, December 31 P553,200

Situation 2 – FRONT CORP.

56. D Dec. 5 deposit P49,000

Dec. 8 deposit 14,000
Dec. 31 deposit in transit 49,000
Total collections/book receipts P112,000

57. A Cash balance, Nov. 30 P423,825

Add: December receipts 112,000
Total 535,825
Less: Disbursements per check register 260,693
Cash balance, Dec. 31 P275,132

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CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) – MANILA BATCH 93
AUDITING FINAL PREBOARD EXAMINATION

58. C Outstanding checks, Dec. 31:

Check no. 4321 P6,000
4340 1,700
4345 11,880
4347 6,300
4348 14,058
4349 7,000
Total P46,938

59. C Adjusted cash balance, Nov. 30, 2023 P423,825

60. B Book Bank

Unadjusted balances P275,132 P273,620
Deposits in transit 49,000
Outstanding checks (46,938)
Service charge (1,000)
Interest 1,550
Adjusted balances P275,682 P275,682

Situation 3 – ROBINDERS, INC.

61. C

FV 12/2023 CV/Cost
Elegance Corp. shares 700,000 540,000 (29.50-2-0.50) x 20,000 sh
Force, Inc. shares 1,000,000 1,080,000 (27.50-0.50) x 40,000 sh
Grace Co. 10% 2M bonds * 1,964,948 1,923,000 (1,973,000-50,000)
Total 3,664,948 3,543,000

* Grace Co. 10% 2M bonds

Principal (2M x 0.8072) 1,614,433
Interest (100,000 x 3.5052) 350,515
PV 1,964,948

62. C

Investment in Dee shares (assoc.)

Initial cost (6/30/2023) 2,400,000
Share from dividends (250,000)
Share from net income 280,000 (2,240,000 x 6/12) x 25%
Investment in assoc. bal. 2,430,000

63. B

Transaction costs – expense

Elegance Corp. shares (10,000)
Force, Inc. shares (20,000)
Dividend income – Force, Inc. 120,000
Interest income – Grace Co. 50,000
Unrealized holding gain – FA 121,948
Share from net income – Handy Corp. 280,000
Total/net investment income 541,948

64. D

Grace Co. bonds at amortized cost * 1,930,690

Handy Corp. shares – assoc. 2,430,000
Total noncurrent investments 4,360,690

* Grace Co. 10% 2M bonds

Principal (2M x 0.7921) 1,584,187
Interest (100,000 x 3.4651) 346,511
Amortized cost, 12/31/2023 1,930,698

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CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) – MANILA BATCH 93
AUDITING FINAL PREBOARD EXAMINATION

65. D

Transaction costs – expense

Elegance Corp. shares (10,000)
Force, Inc. shares (20,000)
Dividend income – Force, Inc. 120,000
Interest income – Grace Co. 57,690 (1,923,000 x 12% x 3/12)
Unrealized holding gain – FA 80,000 from Elegance Corp. and Force, Inc. only
Share from net income – Handy Corp. 280,000
Total/net investment income 507,690

Situation 4 – GENERY CORPORATION

Net Income RE WC
2021 2022 2023 2023 2023
Unadj. bal. (177,400) 214,300 421,700 1,571,500
a. Unearned rent inc., (22,500) 22,500
2022
b. Salaries payable, 2021 (5,500) 5,500
Salaries payable, 2022 (3,600) 3,600
Salaries payable, 2023 (9,900) (9,900) (9,900)
Unused off. supp., 2021 5,400 (5,400)
Unused off. supp., 2022 9,000 (9,000)
Unused off. supp., 2023 6,100 6,100 6,100
Accrued royalty inc., 4,000 (4,000)
2021
Accrued royalty inc., 7,900 (7,900)
2022
Accrued royalty inc., 5,400 5,400 5,400
2023
c. Sales/AR, 2021 28,000 (28,000)
Sales/AR, 2022 30,000 (30,000)
Sales/AR, 2023 22,000 22,000 22,000
EI, 2021 (15,400) 15,400
EI, 2022 (17,400) 17,400
EI, 2023 (13,200) (13,200) (13,200)
d. Repairs expense, 2021 55,000 55,000
Depn expense, 2021- (5,000) (5,000) (5,000) (15,000)
2023 (P55,000/11 yrs)
e. 2023 dividend (120,000) (120,000)
declaration
f. Share premium (120,000)
FV of land donated (480,000)
Loss on sale of an eq. (22,500)
(110,900) 196,200 401,200 901,900 (109,600)
66. B 67. D 68. D 69. A 70. A

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