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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 43 May 2022 CPA Licensure Examination Quiz 5
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AUDITING (Auditing Problems) S. IRENEO C. ESPENILLA

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AP-500Q: PURCHASING & DISBURSEMENT, REVENUE & RECEIPT

AND PRODUCTION CYCLES – AUDIT OF CURRENT ASSETS
(INVENTORY, RECEIVABLES AND CASH AND CASH EQUIVALENTS )
PROBLEM 1:
Presented below is a list of items that may or may not be reported as inventory in a company’s
December 31, balance sheet:
Selling price of goods out on consignment at another company’s store* P2,400,000
(20% of these goods had already been sold by the consignee as per
consignee’s confirmation request reply)
Selling price of goods sold on installment basis 1,300,000
Cost of goods in transit purchased FOB shipping point 360,000
Cost of goods in transit purchased FOB destination 600,000
Cost of goods in transit sold FOB shipping point 400,000
Selling price of goods in transit sold FOB destination 800,000
Cost of goods sold to another company,
company, for which
w hich the company has signed an
agreement to repurchase at a set price that covers all costs related to the
inventory 900,000
Cost of goods in transit sold FOB shipping point 360,000
Freight charges on goods purchased 240,000
Factory labor costs incurred on goods still unsold 150,000
Interest cost incurred for inventories that are routinely manufactured 120,000
Costs incurred
Materials to advertise
on hand goodsinto
not yet placed heldproduction
for resale 60,000
1,050,000
Office supplies 30,000
Raw materials on which the company has startstarted
ed production, but which are
not completely processed 840,000
Factory supplies 60,000
Cost of goods held on consignment from another company 1,350,000
Costs identified with units completed but not yet sold 780,000
Cost of goods in transit sold FOB buyer’s warehouse 120,000
Temp. investment in stocks and bonds that will be resold in the near future 1,500,000
*Sales are made at 40% gross profit based on sales price.
1. How much of these items would typically be reported as inventory in the financial
statements?
a. 6,132,000 b. 6,420,000 c. 6,452,000 d. 6,660,000
You are conducting a financial statements P ROofBUnilab

audit LEMCorporation
2: for the year ended December 31,
2020. You were assigned to conduct a purchase cut-off procedure on the entity’s inventory of goods.
The November inventory level was verified correct at 175,000 units. For the month ended December,
goods totaling to 152,000 units were sold, excluding 35,000 units of consigned goods to Pfizer
Enterprises. A letter from Pfizer Enterprises indicates that it only sold 70% of the consigned goods with
30% left in its warehouse.
During the audit, you determined that the December purchases totaled 55,000 units. Further review
revealed
reveale d that the following Purchase Ord
Orders
ers (POs) to different suppliers
suppl iers were includ
included
ed in the December
purchases:
PO Date Invoice Date Quantity Shipping Date Delivery/Recei

Delivery/Receipt
pt FOB Terms
Date
12/21/20 12/24/20 7,400 12/26/20 1/4/21 Seller
12/30/20 1/3/21 5,500 1/3/21 1/6/21 Shipping Point
12/17/20 1/3/21 4,900 12/17/20 12/20/20 Shipping Point
12/22/20 1/4/21 5,300 1/5/21 1/7/21 Shipping Point
12/19/20 1/5/21 6,100 1/7/21 1/9/21 Destination
12/26/20 1/5/21 2,900 12/30/20 1/5/21 Shipping Point
As a matter of company policy, it uses “point of time at which ownership changes” for inclusion in the
inventory.
Page 1 of 29 0915-2303213/0908-6567516 www.resacpareview.com

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

Quiz 5: AUDIT OF PURCHASING & DISBURSEMENT,
DISBURSEMENT, REVENUE & RECEIPT AND PRODUCTION
PRODUCTION CYCLES -
AUDIT OF INVENTORY RECEIVABLES AND CASH
Requirements:
2. The adjusted
adjusted purchases, in units, during December 2020 should be:
a. 67,300 c. 42,700
b. 38,100 d. 35,200
3. The adjusted
adjusted inventory, in units, at December 31
31,, 2020 should be:
a. 26,300 c. 36,600
b. 33,700 d. 23,200
PROBLEM 3:
The following accounts were extracted from the unadjusted trial balance of Silang Corp. as ofDecember 31,
2020:
Cash 963,200
Accounts receivables 2,254,000
Merchandise inventory 6,050,000
Accounts payable 4,201,000
Accrued expenses 60,400
During your audit, you discovered that the client held its cash records open even after year end.Audit
notes:
a. Collections for
for January 2021 of P654,
P654,600
600 were reco
recorded
rded in the December 2020 cash
records. The receipts of P360,100 represents cash sales with the balance representing
collections from customers who paid within the 5% cash discount period.
b. Accounts payable of P372,400 was paid in January 2021.
2021. The payments
payments on which a
P12,400 cash discount has been taken were included in the December 31, 2020 check
register.
c. Merchandise inventory as stated in the trial balance represented the
the result of the count
conducted on December 30, 2020 on inventories on hand. The following information were
found to be relevant in your audit of inventories:
Goods valued at P275,000 are on consignment with a customer and were not
•
included in the physical count

• Goods costing P217,500 were received from a vendor on January 4, 2021. The
related invoice was received and recorded on January 6, 2021. These goods were
shipped by the vendor on December 31, 2020 under an FOB ship
shipping
ping point terms.
• Goods costing P637,500 were shipped on December 31, 2020, and were received
by the customer on January 2,
2, 2021.
2021. The terms of the in
invoice
voice were FOB shipping
point. The sales of P815,000 has been recorded in 2020.
• A shipment of goods invoiced
in voiced at P182,000 to a customer on December 29, terms
FOB destination
destination was recorded in 2021. The cost of the related goods amounted to
P130,000 and were received by the customer on January 4, 2021.
• The invoice for goods costing P175,000 was received and recorded as purchase on
December 31, 2020. The related goods, shipped FOB Destination were received
on January 4, 2021.
• Goods valued at P612,800
P612,800 are on consignment fro
from
m a vendor. These goods we
were
re
excluded from the physical count.
Requirements: Based on the result of your audit ascertain the following:

4. Adjusted balance of Cash:
a. 963,200 c. 681,000
b. 693,400 d. 668,600
5. Adjusted balance of Accounts receivable:
a. 2,254,000 c. 2,564,000
b. 2,548,500 d. 2,908,600
6. Correct Inventory ending balance:
a. 5,010,000 c. 6,035,000
b. 5,860,000 d. 6,080,000
7. Adjusted accounts payable:
a. 4,243,500 c. 4,615,900
b. 4,398,400 d. 4,790,900
8. Net adjustment to cost of sales:
a. debit by P57,500 c. credit by P580,000
b. debit by P232,500 d. credit by P555,300
9. Correct working capital ratio:

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PRODUCTION CYCLES -
a. 2.20 c. 1.85
b. 1.98 d. 1.80
PROBLEM 4:
In your audit of the December 31, 2020 financial statements of Ivy Inc., you found the following
inventory related transactions:
a. Goods costing
costing P100,000 are on consignment
consignment with a customer. These goods were invoiced
at normal
sales. profit
Being margin
offsite which
on the cou
ounwas
n atte40%
t da
date hi based
which
ch wasonocost
wa s n Deand
cemwas
ber recorded
30, 2020as 2020
, the goods
were not included in the physical count.
b. Goods costing P33

P33,000
,000 were delivered
delivered to Ivy Inc. on January 4,
4, 2021. The invoice of
these goods were received and recorded on January 10, 2021. The invoice showed the
shipment was made on December 29, 2020, FOB shipping point.
c. Goods costing P40,000 were shipped FOB shipping

shipping point on December 31
31,, 2020, and
were received by the customer on January 2, 2021.
2021. Although sale was recorded in
2020, these goods were included in the 2020 inventory
inventory..
d. Goods cost
costing
ing P16,000 were shipped to a customer
customer on December 30,
30, 2020
2020,, FOB
destination. These goods were received by the customer on January 5, 2021 and were
not included in the physical count. The sale was properly recorded in 2021.
e. Goods costing P22,000

P22,000 shipped
shipped by a vendor under FOB d destination
estination term, were received
on January 3, 2021. The related invoice however, were received on December 31, 2020,
thus was recorded as purchase in 2020.
f. Goods costing
costing P50,000 were received
received from a ve
vendor
ndor under consignment te term.
rm. These
goods were included in the physical count. No purchase related to the inventory had
been recorded yet.
g. Ivy Inc., reco

recorded
rded as 2020 sale a P112,00
P112,000
0 invoice for goods delivered to a customer on
December 31, 2020, FOB Destination. The goods were received by the customer on
January 5, 2021. Having been delivered after the count date, the goods were included in
the physical count.
Requirements:
10.
10. What is the net adjustment to inventories as of December 31, 2020?
a. 59,000 c. 50,000
b. 43,000 d. 66,000
11. Assuming all sales are on account, what is the net adjustment to accounts receivable as of
December
Decemb er 31, 2020?
a. 260,000 c. 140,000
b. 252,000 d. 212,000
12. Assuming all purchases are on account, what is the net adjustment to accounts payable?
a. 22,000 c. 11,000
b. 33,000 d. 55,000
13. What is the effect of the errors to the
th e 2020 net income?
a. 194,000 c. 164,000
b. 220,000 d. 204,000
PROBLEM 5:
Bird Company is a manufacturer of small tools. The following information was obtained from the
company’s accounting records for the year ended December 31, 2020:
Inventory at December 31, 2020 (based on physical count in Bird’s

warehouse at cost on December 31, 2020) P1,870,000
Accounts payable at December 31, 2020 1,415,000
Net sales (sales less sales returns) 9,693,400
9,693,400

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PRODUCTION CYCLES -
Your audit reveals the following information:

a. The physical count included tools
tools to be shipped to a customer FOB shipping
shipping point on
December 31, 2020. These tools cost P64,000 and were b billed
illed at P78,500 and were
recorded as December sales.

sales. They were physically
physically se
segregated
gregated awaiting shippinginstructions
from the customer.
b. Goods shipped FOB shipping po

point
int by a vendor were
were in transit on December
December 31, 202
2020.
0.
These invoice amounting to P93,000 were received in January
January 22021
021 and were recorded as
purchases upon receipt.
c. Work in process inventory costing

costing P27,000 was sent to a job contractor
contractor for further
further
processing.
d. Not included in tthe

he physical count were goods returned b
by
y customers on Decemb
December
er 31,
2020. These goods costing P49,000 were inspected and returned to inventory on January
7, 2021. Credit memos for P67,800 were issued to the customers at that date.
e. In transit to a customer
customer on December 31,31, 2020, were goods ccosting
osting P17,000
P17,000 shipped FOB
destination on December 26, 2020.
2020. A sales invoice for P29,400 was issued
issued on January 3,
2021, when Bird Company was notified
notified by a customer that the tools had been received.
f. At exactly 5:00
5:00 pm on December 31,
31, 2020, goods cost
costing
ing P31,200 were received from a
vendor. These were recorded on a receiving report dated January 2, 2021. The related
invoice was recorded
recorded on December 31, 2020, but the goods were not included in the
physical count.
g. Included in the physic

physical
al count were goods
goods received from a vendor on December 27, 2
2020.
020.
However, the related invoice for P36,000 was nnot
ot recorded because the accounting
department’s copy of the receiving report was lost.
h. A monthly freight bill for P1

P16,000
6,000 was received on January 3,
3, 2021. It specifically related
to merchandise bought in December
December 31, 2020, one-half of which was still in tthe
he invent
inventory
ory
at December 31, 2020. The freight was not included in either the inventory or in
accounts payable at December 31, 2020.
Based on the preceding information, compute the December 31, 2020, adjusted balance of thefollowing:
A B C D
14. Inventory 2,095,200 2,031,200 2,046,200 2,078,200
15. Accounts payable 1,552,000 1,560,000 1,467,000 1,591,200
16. Net sales 9,614,900 9,576,500 9,625,600 9,547,100
PROBLEM 6:
You are making an audit of the Malaguku Co. for the year ended December 31, 2020. You have
observed the taki
ta king
ng of phphys
ysic
ical
al iinv
nven
ento
tory
ry and
an d have
ha ve no
note
tedd that
th at al
all l mer
merch
chand
andise
ise actual
act ually
ly
rece
re ceiv
iveed up to the
th e close
lo se of bu
busi sinnes
ess,
s, De
Dece
cemb
mberer 28, 20 20 , were included on the inventory
28 , 2020
sheets. The total of the physical inventory, at invoice cost, is P175,000, while the purchase account
shows a balance of P1,750,000 as of December 31, 2020.
You noted also the following purchases invoices have been recorded in the voucher register as follows:
DECEMBER
RR. 2020 VOUCHER INVOICE
INVOI CE DATE TERMS MERCHANDISE
No. REGISTER RECEIVED
631 P 2,000 December 26 Shipping point December 29
632 4,000 December 26 Destination January 5
633 9,000 January 2 Destination December 30
634 8,000 December 31 Shipping point January 4
635 1,000 January 7 Shipping point December 28
636 6,000 January 3 Shipping point January 6
JANUARY
RR. 2021 VOUCEHR INVOICE
INVOIC E DATE TERMS MERCHANDISE
MERCHAND ISE
No. REGISTER RECEIVED
637 P 8,500 December 20 Destination January 8

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PRODUCTION CYCLES -
638 7,200 January 2 Shipping point December 27
641 4,100 January 2 Destination December 25
Requirements:
17. What is the adjusted balance of Purchases for the period ended December 31, 2020?
a. 1,751,300 c. 1,753,200
b. 1,743,800 d. 1,751,200
18.
What isa.the175,000
adjusted balance of the Inventory
c. account
194,000as of December 31, 2020?
b. 186,000 d. 198,100
PROBLEM 7:
You are engaged in the audit of the inventory of the Kula Inc. as of December 31, 2020. The company
is on physical inventory basis. The physical inventory was actually taken on December 29, 2020 rather
than the evening of December 31, so that the company employees might enjoy the New Year’s festivities.
You have observed the taking of the physical inventory. As taken, the physical inventory included only
merchandise received through December 29. The subsequent compilation of the inventory includes only
the merchandise physically counted and is not yet recorded on the books. After having completed
appropriate work on the inventory as compiled, you make additional tests to determine:
a. The correct cut off the purchases
purchases account for the year 202
2020.
0. (it is the company
company policy
to recognize purchases based on freight terms and the passage of title). The ledger
balance is P650,000.
b. The correc
correctt amount of the inventory to be stated
stated on a comparable basis with acquisition
costs (purchases) and sales. The inventory summary shows a total of P27,000.
Listed
voucherin register
the tableentries
below are
are as
certain matters developed in the course of your tests.Certain
follows:
Dates Mdse.
F.O.B. Terms Shipped Received Invoice No. Amount
December, 2020
Destination 12-23-20 12-26-2
12-26-20
0 1401 P 250
Shipping point 12-24-20
12-24-20 12-30-20 917
9176
6 310
12-24-20 12-31-20 001
0010
0 180
Destination 12-24-20 12-29-2
12-29-20
0 1307 550
12-26-20 1-2-21 6609 690
Destination
Destinat ion 12-26-20 12-31-20 6610 420
Destination 12-26-20 1-3-21 0481 750
12-27-20 12-30-20 367
3671
1 290
Shipping point 1-2-21 1-4-21 6098 350
January, 2021
Destination 12-26-20 1-2-21 7611 680
12-27-20 12-30-20 771
7711
1 460
Destination
Destinat ion 12-27-20 12-29-20 9001 770
Destination 12-28-20 1-2-21 8345 205
12-28-20 1-3-21 4678 315
12-29-20 12-31-20 998
9981
1 595
Destination
Destinat ion 12-29-20 12-31-20 7263 610
Destination 12-31-20 1-4-21 4915 375
Shipping point 1-2-21 1-5-21 5666 805
The physical inventory compilation includes P750 of merchandise received on

consignment from a supplier.
The company has othe
otherr consigned stocks on hand which were not included in th
the
e physicalinventory
compilation and which cost P5,200 if purchased.
Shipments of December 31, 2020 were properly recorded on the books as sales. You
computed the cost of these sales as being P 1,900.
Requirements: Adjusted balances at December 31, 2020 of:

19. Inventory
a. 30,120 c. 27,300
b. 28,220 d. 26,430
20. Purchases

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PRODUCTION CYCLES -
a. 649,675 c. 650,585
b. 649,990 d. 651,650
PROBLEM 8:
Flores Company cans two food commodities which it stores at various warehouses. The companyuses a
perpetual inventory system under which the finished goods inventory is charged with production and
credited for sales at standard cost. The detail of the finished goods inventory is maintained on punched
cards by the tabulating department in units and pesos for the various warehouses.
The accounting department receives copies of daily production reports and sales invoices. Units are then
extended at standard cost and a summary of the day’s activity is posted to the FinishedGoods Inventory
general ledger control account. Next the sales invoices and production reports are sent to the tabulating
department for processing. Every month the control account and detailed tab records are reconciled and
adjustments recorded.
The last reconciliation and adjustments were made at November 30, 2020.
Your CPA firm observed the taking of the physical inventory at all locations in December 31, 2020. The
inventory count began at 4:00 p.m. and was completed at 8:00 p.m. The company’sfigure for the
physical inventory is P342,400. The general ledger control account balance at
December 31 was P384,900, and the final “tab run” of the inventory punched cards showed a
total of P403,300.
Unit cost data for the company’s two products are as follows:
Product Standard Cost
A P2
B 3
A review of December transactions disclosed the following:

1. Sales invoice no. 1310
1310,, December 2, was priced at standard cost fo
forr P11,700 but was
listed on the accounting department’s daily summary at P11,200.
2. A production report for P2

P23,900,
3,900, December 15,
15, was processed twice in error by the
tabulating department.
3. Sales invoice no. 142

1423,
3, December 9, for 1,200 units of product A, was priced atat a
standard cost of P1.50 per uunit
nit by the accounting department. The ttabulating
abulating department
corrected the error but did not notify the accounting department of the error.
4. A shipment of 3,
3,400
400 units of Product A was invoic
invoiced
ed by the billing department as 3,00
3,000
0
units on sales
sales invoice
invoice no. 1504, December 27. the error was discovered by your review of
of
transactions.
5. On December 27 the Pampanga warehous

warehouse e notified the tabulating
tabulating department to re
remove
move
2,200 unsalable units
units of Product A from the ffinished
inished goods inventory, which it did without
receiving a special invoice from the accounting department. The accounting department
received a copy of the Pampanga warehouse notification on December 29 and prepared a
special invoice
invoice which was processed in the
the normal manner. The units were n
not
ot included in
the physical inventory.
6. A report for the production on January 3 of P2,500

P2,500 units of Product B was processed for
the Bulacan plant as of December 31.
7. A shipment of 300 units of Product B was made from Tarlac warehouse to Ken’s Markets,
Inc., at 8:30 p.m. on December 31 as an emergency service. The sales invoice was
processed as of
of December 31. Flores Company
Company prefers to treat the transaction
transaction as a sale
sale in
2020.
8. The working papers of tthe

he auditor observ
observing
ing the physical count at the Bataan warehouse
revealed that 700 units ooff Product B were omitted from Flores’s physical count. Flores
Flores
concurred that the units were omitted in error.
9. A sales invoice fo
forr 600 units of Product
Product A shipped
shipped from the Zambales warehouse was
mislaid and was not processed until January 5. The units were shipped on December 3
30.
0.
10.
10. The physical inventory of the Angeles warehouse excluded 350 u
units
nits of Product A marked

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PRODUCTION CYCLES -
“reserved”. Investigation revealed that this merchandise was being stored as a
convenience for Steve’s Markets, Inc., a customer. This merchandise, which has not been
recorded as a sale, is billed as it is shipped.
11.
11. A shipment of 10,00
10,000
0 units of Product B was made on December 27 from tthe
he Zambales
warehouse to the Bataan warehouse. The shipment arrived on January 6 but had been
excluded from the physical inventories.
Requirements:
What
21. December
is the
Decemb correct
er 31, 2020?inventory balance to be presented in the balance sheet as of
a. 344,300 c. 383,000
b. 375,500 d. 374,300
22. What is the inventory shortage/overage?
a. 7,500 over c. 1,500 over
b. 7,500 shortage d. 0
PROBLEM 9:
On May 31, 2020, a fire completely destroyed the work-in process inventory of Alder Paints.Physical
inventory figures were published as follows:
As o f Janu
Ja nuar
aryy 1, 20
2020
20 As of
May
Ma y 31
31, , 20
2020
Raw Materials P 15,000 P 30,000
Work-in Process 50,000 --
Finished Goods 70,000 60,000
Sales for the first five months of 2020 were P150,000. Raw materials purchased were P50,000. Freight
on purchases was P5,000. Direct labor for the five months was P40,000. To determine thevalue of the
lost inventory, the insurance adjusters have agreed to use an average gross profit rate of 32.5%. Assume
that manufacturing overhead was 45% of direct labor cost.
Requirements:
23.
23. The value of the goods manufactured and completed as of May 31, 2020 was
a. P60,000 c. P95,000
b. P90,000 d. 91,250
24. Raw materials used during the first five months of 2020 were
a. P25,000 c. P40,000
b. P35,000 d. P45,000
25.
25. The total value of goods put in process during the five-month period amounted to
a. P143,000 c. P168,000
b. P150,000 d. P148,000
26.
26. The value of the destroyed work-in process inventory as determined by the insurance
adjusters would be
a. P56,750 c. P86,750
b. P65,750 d. P57,650
PROBLEM 10:
On May 21, 2020, a fire destroyed the entire merchandise inventory on hand of NaturalCorporation. The
following information is available:
Sales, January 1 through May 2, 2020 P380,000

Sales return (covering the same period) 20,000
Sales allowance (covering the same period) 10,000
Sales discounts (covering the same period) 25,000
Inventory, January 1, 2020 80,000
Purchases, January 1 through May 2, 2020 (including P40,000 of
goods in transit on May 2, 2020 shipped FOB shipping point) 400,000
Purchase discounts 40,000
Purchase returns and allowances 30,000
Mark-up percentage on cost 20%
27. What is the estimated inventory on May 2, 2020 immediately prior to the fire?
a. 70,000. c. 110,000.

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PRODUCTION CYCLES -
b. 82,000. d. 122,000.
28.
28. How much should be recognized as inventory loss?
a. 30,000. c. 70,000.
b. 42,000. d. 82,000.
PROBLEM 11:
You were assigned to test the reasonableness of the inventory account balance as reported byyour
client, Surety Corp. The following information is made available by Surety Corp.’s accountant:
Cost Retail
Beginning inventory P598,400 P1,500,000
Purchases 3,048,400 5,500,000
Freight in 80,000
Purchase returns 140,000 180,000
Mark-ups 600,000
Mark-up cancellations 100,000
Mark-downs 1,300,000
Mark-down cancellations 385,000
Sales 4,470,000
Sales returns 150,000
Sales discount 200,000
Employee discount 400,000
Ending inventory as a result of the physical count conducted on December 31, was at P649,600. What
is the amount of estimated inventory shortage, if any, as a result of your test of reasonableness under
the following assumed cost formula? (round-off cost percentage to 2 wholenumbers)
29.
29. Lower of cost or average/Conservative/Co
average/Conservative/Conventional
nventional Approach
a. none b. 176,050 c. 327,700 d. 479,350
30. Average Approach

a. none b. 176,050 c. 294,000 d. 327,700
31.
31. FIFO Retail Approach
a. 176,050 b. 294,000 c. 378,250 d. 479,350
PROBLEM 12:
Nancy Inc. had the following items of merchandise inventories with related information aboutestimated
selling price and cost to sell as of December 31, 2020:
Class Z:
Item Quantity Unit Cost Unit Selling Price Unit Cost to Sell
Z-01 10,000 P20 P30 P5
Z-02 15,000 25 30 8
Z-03 20,000 30 40 14
Z-04 25,000 32 45 10
Z-05 30,000 35 50 20
Class Y:
Item Quantity Unit Cost Unit Selling Price Unit Cost to Sell
Y-01 20,000 P22 P25 P2
Y-02 22,000 28 30 5
Y-03 28,000 25 40 10
Y-04 25,000 30 35 10
Y-05 30,000 15 30 5
Required:
32.
32. What is the correct carrying value of inventories
in ventories if the lower of cost or NRV valuation is
employed on an item per item basis?
a. 5,515,000 b. 5,831,000 c. 5,981,000 d. 6,100,000
33.
33. What is the loss on inventory write-down, assuming that direct write-off method is used
under requirement 1?
a. none b. 119,000 c. 150,000 d. 466,000

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PRODUCTION CYCLES -
34.
34. What is the correct carrying value of inventories if the lower of cost or NRV valuation is
employed on a per class basis?
a. 5,515,000 b. 5,831,000 c. 5,981,000 d. 6,100,000
35.
35. What is the loss on inventory write-down, assuming that direct wr
write-off
ite-off method is used
under requirement 3?
a. none b. 119,000 c. 150,000 d. 466,000
The Savior Corporation uses the lower of P RO

cost orB LE
net M 13: value
realizable value inventory. Data regardingthe items
in work-in-process inventory are presented below:
Markers Pens Pencils
Historical cost P24,000 P18,880 P30,000
Selling price 36,000 21,800 38,000
Estimated cost to complete 3,000 2,620 6,200
Replacement cost 20,800 16,800 16,800
Normal profit margin as a % of selling 20% 20% 20%
price
Cost to sell based on selling price 5% 10% 10%
Required:
36.
36. What is the loss on write-down under the direct write-off method?
a. none b. 3,880 c. 3,320 d. 5,620
37.
37. What is the loss on write-down under the allowance method, assuming that the
unadjusted balance of the allowance for inventory write-down is at P2,000?
a. none b. 1,880 c. 1,320 d. 3,620
38.
38. What is the gain on recovery of previous write-down under the allowance method,
assuming that the unadjusted balance of the allowance for inventory write-down is at
P5,000?
a. none b. 1,120 c. 3,680 d. 1,380
39.
39. What is the correct carrying value of inventories as of December 31?
a. 72,880 b. 76,200 c. 69,000 d. 67,200
PROBLEM 14:
You observed the inventory count of the Solsons Company as of December 31, 2020. The clientprepared
the summary presented below and gave it to you for verification.
Quantity Cost NRV Amount

A 360 units P3.60/dozen P3.64/dozen P1,310.40
B 24 units 4.70 each 4.80 each 112.80
C 28 units 16.50 each 16.50 each 1,353.00
D 43 units 5.15 each 5.20 each 176.80
E 400 units 9.10 each 8.10 each 3,640.00
F 70 dozens 2.00 each 2.00 each 140.00
G 95 grosses 144.00 per gross 132.00 per gross 13,780.00
40.
40. How much should the inventory be presented in the 2020 balance sheet?
a. 18,364.25. c. 20,513.20.
b. 19,604.25. d. 20,315.00.
PROBLEM 15:
Gloria Corporation uses the lower of cost or net realizable value inventory.
inventory. Data regarding the
company’s inventories are as follows:
The general ledgers showed the following balances:

Cost: Finished goods P1,520,000
Work-in-process 748,000
Raw materials 2,875,000
Allowance: Finished goods (10,000)
Raw materials (40,000)

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The following information were further furnished to you by the client:
Finished Goods Item M Item P Item Q

Cost P550,000 P540,000 P430,000
Selling price 675,000 620,000 820,000
Estimated cost to sell, as % of sales 20% 15% 15%
Work-in-process
Cost P240,000 P188,000 P320,000
Selling price 360,000 289,000 735,000
Estimated cost to complete 48,000 97,650 74,000
Replacement cost 208,000 168,000 375,000
Normal profit margin as % of selling price 25% 35% 40%
Raw Materials – Item M A B C

Cost P250,000 P500,000 P400,000
Current purchase price 250,000 480,000 375,000
Raw Mater
te rial
alss – It
Iteem P X Y Z
Cost P400,000 P300,000 P200,000
Current purchase price 450,000 275,000 180,000
Raw Materi
er ials
al s – Item
te m Q D E
Cost P375,000 P450,000
Current purchase price 395,000 420,000
Required:
41. What is the correct Finished Goods Inventory to be reported at the balance sheet?
a. 1,520,000 b. 1,497,000 c. 1,507,000 d. 1,510,000
42. What is the correct Work-in-process Inventory to be reported at the balance sheet date?
a. 708,000 b. 728,000 c. 748,000 d. 759,000
43. What is the correct total Raw Materials Inventory, to be reported at the balance sheet date?
a. 2,830,000 b. 2,755,000 c. 2,785,000 d. 2,830,000
44. What is the total loss on inventory write-down to be reported for the period?
a. 153,000 b. 90,000 c. 63,000 d. 103,000
45. Assuming direct write-off method was used in recognizing inventory write-down, how much is
the total loss on write-down for the year?
a. 153,000 b. 90,000 c. 63,000 d. 103,000
PROBLEM 16:
In the course of your audit of DKNY Company’s “Receivables” account as of December 31, 2020,you
found out that the account comprised the following items:
Trade accounts receivable P1,550,000
Trade accounts receivable, assigned (proceeds from assignment
amounted to P650,000) 750,000
Trade accounts receivable, factored (proceeds from factoring done on
a without-recourse basis amounted to P250,000 300,000
12% Trade notes receivable 200,000
20% Trade notes receivable, discounted at 40% upon receipt
of the 180-day note on a without recourse basis 300,000
Trade receivables rendered worthless 50,000
Installments receivable, normally due 1 year to two years 600,000
Customers’ accounts reporting credit balances
arising from sales returns 60,000
Advance payments for purchase of merchandise 300,000
Customers’ accounts reporting credit balances arising
from advance payments 40,000
Cash advances to subsidiary 800,000
Claim from insurance company 30,000
Subscription receivable due in 60 days, 600,000
Accrued interest receivable 20,000
Deposit on contract bids 500,000
Advances to stockholders (collectible in 2023) 2,000,000

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Requirements:
46.
46. How much is the total trade receivables?
a. 3,650,000 c. 3,000,000
b. 3,100,000
3,100,000 d. 2,950,000
47.
47. How much is the amount to be presented as “trade and other receivables” under current
assets?
a. 7,350,000 c. 4,850,000
b. 5,350,000 d. 4,050,000
48.
48. How much
a. loss from receivable financing should
36,000 be recognized in the income statements?
c. 86,000
b. 50,000 d. 105,000
PROBLEM 17:
In relation to your audit of Inuyasha Inc.’s accounts receivable you ascertained the following
information:
a. The general ledger balances of the

the client’s receivable and related
related accounts were:
Accounts receivables P3,225,300
Allowance for bad debts (169,000)
Amortized cost P3,056,300
b. Inuyasha Inc. estimates its bad debt

debt losses (expected
(expected credit losses) by agi
aging
ng its
accounts receivable, the aging schedule of accounts receivable at December 31, 2020,
is presented below:
Age of accounts Amount
Current
1 to 30 days past due P1,686,400
922,000
31 to 60 days past due 384,800
61 to 90 days past due 153,300
Over 90 days past due 78,800
c. The company normally sells n/30.
d. Furthermore, the co
company’s
mpany’s uncollectible
uncollectible accounts experience
experience for the past 5 years are
summarized in the schedule that follows:
Y ea r Current 1 – 30 31 – 60 1 – 90 More than
days PD days PD days PD 90 days
PD
2019 1% 6% 9% 23% 55%
2018 2% 8% 10% 18% 60%
2017 1% 4% 11% 16% 45%
2016 3% 5% 12% 22% 45%
2015 3% 2% 8% 21% 45%
Requirements:
49.
49. What are the corresponding percentages to be used per ag
agee category in computing for the
client’s require allowance for bad
b ad debts (expected credit losses)?
Current 1 – 30 31 – 60 1 – 90 > 90
a. 1% 3% 10% 20% 45%
b. 1.5% 5% 10% 25% 50%
c. 2% 5% 10% 20% 50%
d. 2% 3% 10% 25% 45%
50.
50. The required allowan
allowance
ce for bad debt expense is:
a. 173,653 c. 188,368
b. 185,415 d. 220,842
51.
51. The net realizable value of the company’s
company’s accounts receivable on December 31, 2020,
should be:
a. 3,036,932 c. 2,986,345
b. 3,004,458 d. 2,976,540

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PROBLEM 18:
The Mexican Corp. grants its customers 30 days credit. The company uses the allowance methodfor its
uncollectible accounts receivable. During the year, a monthly bad debt accrual is made bymultiplying
2% by the amount of credit sales for the month. At the fiscal year-end of Dec
December
ember
31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible
accounts is adjusted accordingly.
At the end of 2020 before any audit adjustments, the general ledger accounts showed balancesof
account receivable at P1,230,000 and the allowance for bad debt at P106,000. Accounts receivable
activity for 2020 included the following:
Credit sales P12,800,000
Write offs, 82,000
The company’s controller prepared the following aging summary of year-end accounts receivable:
Age
Ag e Group
Gro up Amoun
Amo untt Perce
Per cent
nt Coll
Co llect
ectib
ible
le
0 – 60 days P825,000 98%
61 – 90 days 220,000 90%
91 – 120 days 50,000 70%
Over 120 days 128,000 60%
Total P1,223,000
It was ascertained that P40,000 from the over 120 days accounts are absolutely worthless.
Requirements:
52.
52. How much is the unreconciled difference between the general ledger and the subsidiary
ledger balance of accounts receivable and how should it be accounted for:
a. P7,000; GL prevailing over SL, with the difference being charged against sales.
b. P10,000; GL prevailing over SL, with the difference being charged to bad debt
expense.
c. P7,000; SL prevailing over GL, with the difference being charged against
against sales.
d. P10,000; SL prevailing over GL, with the difference being charged to bad ddebt
ebt
expense.
53.
53. How much is the total bad debt expense for 2020?
a. 304,700. c. 280,700.
b. 278,700. d. 294,700.
54.
54. How much is the net realizable value of accounts receivable at December 31, 2020?
a. 1,123,000. c. 1,094,300.
b. 1,118,300. d. 1,223,000.
PROBLEM 19:
You are auditing the Accounts Receivable of Rovers Inc. as of December 31, 2020. You found thefollowing
information in the general journal:
Accounts receivable P1,466,720

Less: Allowance for doubtful accounts (46,720)
Accounts receivable net P1,420,000
The accounts receivable subsidiary ledger had the following details:

Customer Invoice date Amount Balance
Gudang 9/12/20
9/12/2020
20 P139,200 P139,200
Tisoy 12/12/2020 153,600
12/02/2020 99,200 252,800
Gusoy 11/17/2020
11/17/2020 185,120
10/08/2020 176,000 361,120
Naning 12/08/2020
12/08/2020 160,000
10/25/2020 44,800
8/20/2020 40,000 244,800
Nanong 9/27/2020 96,000 96,000
Balong 8/20/2020
8/20/2020 71,360 71,360
Peejong 12/06/2020 112,000
11/29/2020 169,440 281,440
Total P1,446,720
Additional information:

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PRODUCTION CYCLES -
a. You discovered based on your review of subsequent
subsequent events that Balong recently went
bankrupt, thus your suggested that the amount receivable
receivable from the same shall be
written off.
b. You also discovered that the invoice dated 12/02/2020

12/02/2020 has already been settled by
by
Tisoy per OR number 34675. This amount however
however has been erroneously posted
against Gusoy’s subsidiary ledger as a settlement for an invoice dated 11/05/2
11/05/2020
020 for
the same amount.
c. The estimated bad d

debt
ebt rates (expected
(expected credit
credit loss rates) below are based on the
company’s receivable
Age o f ac
acco
coun ts collection
unts Ex
Expe experience:
pect
cted
ed cred
cr edit
it lo
loss
ss ra
rate
tes
s0
– 30 days 2% 31 – 60 days
5% 61 – 90 days 10% 91 – 120 days
20% Over 120 days 50%
Required:
55.
55. Assuming that there were no other entries to the allowance for doubtful accounts, what is
the correct bad debt expense for the year?
a. 95,680 c. 141,984
b. 92,704 d. 144,960
56.
56. What is the correct allowance for bad
ba d debt expense for the year ended December 31,
2020?
a. 156,000 c. 120,320
b. 153,024 d. 117,344
57.
57. What is the net adjustment to the Accounts receivable in the general ledger?
a. 172,560 c. 91,360
b. 119,200 d. 71,360
58.
58. What it the carrying value
valu e of the company’s accounts receivable as of December 31,
2020?
a. 1,255,040 c. 1,275,040
b. 1,258,016 d. 1,295,040
59.
59. What is the necessary adjusting entry to adjust any unlocated difference between the SL
and GL?
a. Bad debt expense 20,000
Accounts receivable 20,000
b. Sales 20,000
c. Accounts receivable 20,000
Other income 20,000
d. No necessary entry
PROBLEM 20:
You were assigned to audit Natasha Inc.’s accounts receivable which had an unadjusted balanceper
books of P755,142, net of an allowance for bad debts amounting to P32,858. Your inquiriesand
investigations revealed the following information:
a. The only entries in the Bad debt expense
expense account
account were:
A credit for P1,296 on December 1, 2020, because a customer remitted in full, an
▪
account charged off on October 31, 2020.

A debit on December 31, for the amount of the credit to Allowance for bad debt on the
▪
same date.
b. The allowance ffor

or bad debt accounts
accounts had the following details:
details:
Jan. 1, balance P15,250
June. 30, write off of accounts (1,296)
Aug. 31, write off of accounts (3,280)
Oct. 31, write off of accounts (2,256)
Dec. 31, Bad debt expense (3%*788,000) 23,640
Dec. 31, balance
P32,858
Records revealed that the December 31, 2020 bad debt expense was debited to the bad debtexpense
account and credited to allowance for bad debt for the amount shown above, while the write offs
creditedamounts
correct to accounts
to bereceivable
receivable
written offamounted only
were shown to P6,032.
in the Further investigationrevealed that the
analysis above.

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c. An aging schedule of the accounts receivable as of
of December 31,
31, 2020,
2020, and the decisions
decisions
are as shown in the table below:
Amount to which the allowance is to be
adjusted after adjustments and corrections

Age Net debit
bal.
have been made (Expected Credit Loss)
0 – 1 month P372,960 1%
1
3––3
6 months
months 307,280
88,720 2%
3%
Over 6 months 24,000 Definitely uncollectible, P4,000; P8,000 is
considered to be 50% uncollectible; the
remainder is estimated to be 80% collectible.
d. There is a credit b
balance
alance in one accounts receivable (0 – 1 months) of P8,0
P8,000;
00; it
represents an advance on a sales contract; also there
there is a c
credit
redit balance in one of the 1 –
3 months accounts
accounts receivable of P2,000 for which merchandise will be accepted by tthe he
customer.
e. The accounts receivable

receivable control account is not in agreement with the
the subsidiar
subsidiary
y ledger.
The differences cannot be located, and the company’s accountant decides to ad adjust
just the
control to the sum of the subsidiaries after corrections are made.
Requirements:
60.
60. What is the correct bad debt expense for the year?
a. 10,296 c. 13,343
b. 10,640 d. 14,640
61.
61. What is the adjusting journal entry to record the remaining unlocated difference between
the general ledger and the subsidiary ledger after consideration o
off all adjustments?
a. Accounts receivable P5,760
Bad debt expense P5,760
b. Accounts receivable P5,760
Sales P5,760
c. Accounts receivable P4,960
Sales P4,960
d. Accounts receivable P9,760
Bad debt expense P9,760
62.
62. What is the accounts receivable balance on December 31, 2020?
a. 793,200 c. 798,960
b. 798,160 d. 808,960
63.
63. What is the required allowance
allow ance for bad debt expense on December 31, 2020?
a. 19,057 c. 29,357
b. 19,857 d. 32,857
64.
64. What is the accounts receivable net of allowance for bad debts?
a. 774,143 c. 779,503
b. 779,103 d. 779,903
PROBLEM 21:
You are auditing the accounts receivable and the related allowance for bad debts account of Sayote Inc.
The control account of the aforementioned accounts had the following balances:
Accounts Receivable P1,270,000

Less: Allowance for bad debt (78,000) Net
Book Value P1,192,000
Upon your investigation, you found out the following information:
a. The company’s
company’s normal
normal sales
sales term
term is n/30.
b. The allowance for bad debt account had the

the following details
details in th
the
e general ledger:
Allowance for Bad Debts
July 31 Write off 24,000 Jan. 131 Provision

Dec. Balance 30,000
72,000
c. The subsidiar
subsidiary
y ledger balances of
of the company’s
company’s ac
accounts
counts receivable
receivable as of December
December 31,
2020 contained the following information:

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Debi
De bitt ba
bala
lanc
nces
es Cr
Cred
edit
it bala
ba lanc
nces
es
Under one month P540,000 Kamote Co. P12,000
One to six months 552,000 Kutchay Corp. 21,000
Over six months 228,000 Kalachuchi Inc. 27,000

P1,3
P1,320,0
20,000
00 P60,
P60,000
000
Additional information
• The credit balance with Kamote Co. was for an overpaymen
overpaymentt from the customer. The
company delivered additional merchandise to Kamote Co. on January 3, 2021 to cover
such overstatement.
• The credit balance of Kutchay Corp. was due to a posting error, the amount should
have been credited to Kutchara Corp for a 60 day outstanding receivable.
• The credit balance from Kalachuchi Inc. was a cash advance for a delivery to be made
on January 15 the following year.
d. It was estimated that the expected c credit

redit loss is 1 percent of accounts aged under o
one
ne
month while the expected credit loss is 2 percent for accounts aged one to six. Th The
e
accounts over six months are analyzed as follows:
Definitely uncollectible (required write-off) P72,000
Doubtful (expected credit loss at 50%) 36,000
Apparently good, but slow (expected
(expected credit loss at 10%) 120,000
Total P228,000
Required: Based on your audit, answer the following:
65.
65. What is the entry to adjust any unlocated differenc
difference
e between the control account and the
subsidiary ledger?
a. Sales 10,000
b. Accounts receivable 10,000
Sales 10,000
c. Sales 14,000
d. No unlocated
unlocated difference
difference
66.
66. The adjusted accounts receivable balance on December 31, 2020, should be
a. 1,212,000 c. 1,239,000
b. 1,227,000 d. 1,260,000
67.
67. The required balance of the allowance for bad debts account on December 31, 2020, is
a. 46,020 c. 64,020
b. 46,440 d. 142,020
68.
68. The entry to adjust the allowance for bad debts account is
a. Bad debts expense 46,020
Allowance for bad debts 46,020
b. Bad debts expense 52,020
c. Allowance for bad debts 6,000
Bad debts expense 6,000
d. Bad debts expense 40,020
PROBLEM 22:
The substantiate the existence of the accounts receivable balances as at December 31, 2020 of
Lucrative Company, you have decided to send confirmation requests to customers. Below is a
summary of the confirmation requests to customers. Below is a summary of the confirmation replies
together with the exceptions and audit findings. Gross profit on sales is 20%. The company is under
the perpetual inventory method.
Name of Customer Balance Per Books Comments from Customers Audit Findings
Cruz P50,000 P30,000 was returned on Returned goods were
January 2, 2020. Correct received January 5,
balance is P20,000. 2020.
Frias P10,000 Your CM representing price The CM was taken up
adjustment dated December by Lucrative in 2021.
29, 2020 cancels this.

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Lazo P48,000 You have overpriced us by The complaint is
P50. Correct price should be valid.
P100.
Sia P37,500 We received the gods only Term is shipping
on January 5, 2021 point. Shipped in
2020
Yao P45,000 Balance was offset by our Lucrative credited
December shipment of your accounts payable for
raw materials. P45,000 to record
purchases.
supplier Yao is a
Requirements:
69.
69. If the necessary adjusting journal entry is made regarding the case of Mr. Cruz, the net
income will:
a. increase by b. decrease by c. decrease by d. increase by
P6,000 P30,000 P6,000 P30,000
70.
70. The effect on 2020 net income of Lucrative Company of its failure to record CM involving
transaction with Mr. Frias:
a. P10,000 over b. P10,000 under c. P2,000 over d. P2,000 under
71.
71. The actual number of units sold to Mr. Lazo is:
a. 960 b. 320 c. 480 d. 1,920
72. The overstatement of receivable from Mr. Lazo is:

a. 32,000 b. 8,000 c. 24,000 d. 16,000
73.
73. The accounts receivable from Mr
Mr.. Sia is:
a. correctly stated b. 37,500 over c. 37,500 under d. 75,000
75,000 over
74.
74. The adjusting journal entry to correct the receivable from Mr. Yao is;
a. Purchases 45,000
b. Accounts payable 45,000
Purchases 45,000
c. Accounts receivable 45,000
Accounts payable 45,000
d. Accounts payable 45,000
PROBLEM 23:
You are revisiting the audit working paper presented to you by your audit staff in line with his audit
procedures done in auditing Rico Corporation’s accounts receivable. The following were lifted from the
said working papers:
Audit notes:
A. Rico Corporation’s accounts rece
receivable
ivable subsidiary ledger had the following details:
Customer Invoice date Invoice Amount Balance
Zinc Inc. 12/6/20 127,000
10/29/20 84,000 211,000
Yankee Co. 12/30/20 42,000

9/27/20 30,000
8/20/20 53,520 125,520
Xylon Inc. 12/30/20 40,000

12/8/20 80,000
11/25/20 63,600 183,600
Winnie Co. 11/17/20 138,840
10/9/20
8/20/20 132,000
74,400 345,240
Vicor Corp. 12/10/20 250,000 250,000

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Ursula Inc. 9/12/20 104,400 104,400
Total 1,219,760
B. The accounts receivables balance were confirmed with the c customers.

ustomers. You hahave
ve noted the
following exceptions:
Customer Balance per reply Remarks
Zinc Inc. P197,000 The invoice dated 10/29/20 was erroneously priced at
P84 per unit. The agreed upon price per the customer’s
approved purchase order was at P70.
Yankee Co. 83,520 Invoice dated 12/30/20 was for a sale made on the
same date. An additional clause in the sales agreement
with Yankee Co. is to install the merchandise sold
which the company is yet to accomplish as of
December 31. The installation service is considered as
a separate performance obligation contract and based
on pro-rata allocation, you determined that 20% of
the
invoice price is attributable to the unearned
installation
service revenue.
Xylon Inc. 143,600 The difference was due to the invoice dated 12/30/20.
Goods have not been received by Xylon Inc. yet as of
12/31/20. Term of sale is FOB Shipping Point.
Winnie Co. 326,400 Credit memo for customer returns for damaged goods
worth P18,840 related to the invoice dated 11/17/20
was recorded in January of the following year.
Vicor Corp. 200,000 Invoice dated 12/10 was the sales price of 2,500 units
of merchandise delivered to Vicor Corp. on the same
date on consignment basis. As of December 31, per
Vicor Corp.’s reply, 500 units still remained on hand.
The consignment agreement provides Vicor Corp. a
commission of 20% based on sales.
Ursula Inc. No reply Ursula Inc. is under liquidation and the amount
receivable from the company is deemed definitely
uncollectible.
C. The balance of the allowance for doubtful accounts at the beginning

beginning of the year was at P52,500.
During the year, the company wrote-off P44,200 receivables and recovered P24,800 from the
previously written-off accounts. The company’s policy with regard uncollectible accounts are
summarized below:
Age % of collectibility
0-30 days 99%
31-60 days 9
61-90 days 95%
91-120 days 90%
Over 120 days 50%
Required:
75. What is the correct balance of the accounts receivable from Zinc Inc.?
a. 127,000 c. 207,000
b. 197,000 d. 211,000
76. What is the correct balance of the accounts receivable from Vicor Corp.?
a. 200,000 c. 120,000
b. 160,000 d. 100,000
77. What is the correct balance of

o f the accounts receivable gross of any allowances as of December
31?
a. 1,004,520 c. 950,520
b. 900,520 d. 984,120
78. What is the correct allowance for bad debts as of December 31, 2020?
a. 85,138 c. 85,910
b. 86,310 d. 84,802
79. What is the correct bad debt expense?

a. 157,210 c. 157,610
b. 156,102 d. 156,438

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PROBLEM 24:
On December 31, 2019, ISIAH Company, a financing institution lent P4,000,000 to PSALMS Corp.due 3
years after. The loan is supported by an 8% note receivable. Transaction costs incurred tooriginate the
loan amounted to P248,000. P374,000 was chargeable to Psalms as origination fees. Interest on the
loan are collectible at the end of each year. The yield rate on the loan is
9.25%. The company estimated at origination date that receivable is fully collectible thus did notinitially
provide loss arising from 12 month expected credit loss (ECL).
Isiah was able to collect interest as it became due at the end of 2020. There was no evidence of
significant increase in credit risk by the end 2020 and that the receivable is determined to have “low
credit risk”.
During 2021, however, due to Psalms Corporation’s business deterioration and due to political instability
and faltering global economy, the company was not able to collect amounts due at the end 2021. After
reviewing all available evidence at December 31, 2021, Isiah Company determined that it was probable
that Psalms would pay back only P3,400,000 collectible as follows:
December 31, 2023 P1,400,000
December 31, 2024 1,000,000
December 31, 2025 600,000
December 31, 2026 400,000
As of December 31, 2021, the prevailing rate of interest for all debt instruments is 14%.Based on
the above information and on your audit, answer the following requirements:
80.
80. What is the carrying value
valu e of the loans receivables as of December 31, 2020?
a. 3,874,000 b. 3,912,345 c. 3,954,237 d. 4,000,000
81.
81. What is the impairment loss to be recognized in the 2021 statement of comprehensive
income?
a. 1,336,188 b. 1,294,296 c. 1,094,018 d. 1,656,188
82.
82. What is the interest income to be recognized in the 2023 statement of comprehensive
income?
a. 228,818 b. 264,570 c. 159,542 d. 242,170
83.
83. What is the correct carrying value of the loans receivable as of December 31, 2023?
a. 2,860,219 b. 2,013,832 c. 1,724,789 d. 1,884,332
PROBLEM 25:
On December 31, 2019, Leni Company, a financing institution lent P10,000,000 to Digong Corp.due 3
years after. The loan is supported by an 10% note receivable. Based on the company’s initial estimates
the present value of the 12 months expected credit loss (ECL) discounted at 9%is at 1,000,000. The
probability of default (PD) is at 5%.
Leni Company was able to collect interest as it became due at the end of 2020. There was no evidence
of significant increase in credit risk by the end 2020 and that the receivable isdetermined to have “low
credit risk”. There were no changes in its initial estimate of the 12 months expected credit loss either.
By the end of 2021, Leni Company was able to collect interest as it became due. Based on available
forward-looking information (determinable without undue cost or effort), however, thereis an evidence
that there was a significant increase in credit risk by the end of 2021. Leni Company therefore had to
change its basis of calculation of the loss allowance from 12 months ECL to lifetime expected credit loss.
The present value of the lifetime expected credit loss discounted at 9% is at 4,000,000. The probability
of default (PD) is at 20%.
During 2022, however, due to Digong Corp.’s business deterioration and significant financial difficulties,
the company was not able to collect amounts due at the end 2022. After reviewing allavailable evidence
at December 31, 2022, Leni Company determined that the receivable is credit-impaired and that
impairment loss should be recognized. Leni Company also entered into the following concessions with
Digong Corp.:
a. Interest due
due in 2022 is waived.
b.
Only 8M of the princ
2024. principal
ipal shall be collect
collected
ed in 2 eq
equal
ual installments, at the end of 2023
2023 and
c. Annual interest on the 88MM revised principal shall be collec
collected
ted at 1
12%
2% at the end of each
year for the next two years (based on outstanding balance).

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As of December 31, 2022, the prevailing rate of interest for all debt instruments is 14%.
Based on the above information and on your audit, answer the following requirements:
84.
84. What is initial carrying value of the loans receivables as of December 31, 2019?
a. 10,000,000 b. 9,900,000 c. 9,950,000 d. 9,000,000
85.
85. What is the net amount to be recognized in the profit or loss for 2020 in relation to the
loan?
a. 995,500 b. 995,000 c. 990,000 d. 1,000,000
1,000,000
86.
86. What is the carrying value of the loans receivable as of December 31, 2021?
a. 10,000,000 b. 9,000,000 c. 9,200,000 d. 6,000,000
87.
87. What is the carrying value of the loans receivable as of December 31, 2022 after
impairment recognition?
a. 8,000,000 b. 8,123,0231 c. 9,211,570 d. 8,211,570
PROBLEM 26:
Visage Corp. had the following receivable financing transactions during the year:
▪ On March
M arch 1, 2020, Visage Corp. factored P500,000 of its accounts receivables to BPI. As of
the date
date of
of factoring, it was ascertained
ascertained that P20,000 of the ac
accounts
counts receivable is doubtful
of collection. BPI advanced P350,000 cash to Visage Corp. and withheld P50,000 as factors
holdback (to cover future sales discount and sales returns and allowances). The company
company
incurred P10,000
P10,000 direct transaction costs (legal fees and other professional fees) related to
the factoring. The factoring was done on a without-recourse basis, thus transferring all
significant risks and rewards associated to the receivable to BPI.
▪ On May 1, 2020, Visage Corp. assigned P800,000 of its outstanding accounts receivable to
BPI in cconsideration
onsideration of a P500,000, 24% loan. BPI charged the company 2% of th
thee ac
acco
coun
unts
ts
assigned as service charge. By the end of May, Visage Corp. collected P200,00
P200,0000 cash from
the assigned
assigned ac
accounts
counts net of a P
P5,000
5,000 sales discount. By the end of JJune,
une, Visage
Visage CCorp.
orp.
collected another P150,000 from the assigned accounts after P4,000 sales discount. The
company accepted merchandise originally invoiced at P30,000 as sales returns and wrote-off
P20,000 of the assigned
assigned accounts as worthless. It was agreed between parties that monthly
collections shall be remitted to the bank
bank as partial payment of
of the loan and interest.
▪ On July 1, 2020, Visage Corp. accepted from a customer a 6-month P600,000, 12% notes
receivable for the sale of merchandise. On October 31, 2020, Visage Corp. discounted the
note to BPI at a discount
discount rate of 10%. The discounting was done on a without-recourse
basis, thus transferring all significant
significant risks
risks and rewards associated to the
the re
receivable
ceivable to BPI.
Requirements:
88.
88. How much should be reported as gain/loss in the income statement on the transfer of
receivables on the factoring of receivable on March 1?
a. 90,000 b. 100,000 c. 80,000 d. none
89.
receivables on the assignment of receivable on May 1?
a. 16,000 b. 126,000 c. 316,000 d. none
90.
90. What is the carrying value of the accounts receivable-assigned as of June 30?
a. 391,000 b. 400,000 c. 450,000 d. none
91.
91. What is the carrying value of the loans payable related to the accounts receivable
assigned as of June 30?
a. 150,000 b. 166,200 c. 310,000 d. none
92.
receivables on the discounting of the note receivable on July 1?
a. 10,600 b. 1,400 c. 24,000 d. none

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PROBLEM 27:
The cash account in the ledger of Ilang-Ilang Company had a balance of P105,600 at December 31, 2020.
An examination of the account, however, disclosed the following:
1. The sales boo

book
k was left open up to January 5, 20
2021,
21, and cash sale
sales
s totaling P15,000 were
considered as sales in December.
2. Checks of P9,3
P9,300
00 in payment of liabilities were prepared bef
before
ore December 31,
31, 2020,
2020,
recorded in the books, but not mailed or delivered to payees
3. Post-dated cust
customer
omer collection checks totaling P7,80
P7,800
0 are being held by the cashier
cashier as part of
cash.
cash. The company’s experience shows that post-dated checks are eventually realized.
4. Customer’s ch
check
eck for
for P1,500 d
deposited
eposited with but returned
returned by bank, “NSF”, on December
27, 2020. Return was not recorded in the books.
5. The cash acc

account
ount includes P40,000
P40,000 earmarked for the purchas
purchase
e of a mini-computer which
will soon be delivered.
93. The cash balance to be shown on the balance sheet on December 31, 2020 should be:
a. P105,600 c. P58,400
b. P50,600 d. P60,500
PROBLEM 28:
In connection with your audit of BIG BROTHER CORP. for the year ended December 31, 2020, you
gathered the following information:
Current account at Bank of the Philippine Islands P6,000,000

Current account at Equitable PCI Bank (300,000)
Payroll account 1,500,000
Foreign bank account – restricted (in USD) ** 60,000
Postage stamps 3,000
Employee’s post dated check 12,000
IOU from a key officer 30,000
Credit memo from a vendor for a purchase return 60,000
Traveler’s check 150,000
Customer’s not-sufficient-funds check 45,000
Money orders 90,000
Petty cash fund (P12,000 in currency and expense 30,000
vouchers for P18,00
P18,000)
0)
Treasury bills, due 3/31/21 (purchased 12/31/20)
12/31/20) 600,000
Treasury bills, due 1/31/21 (purchased 1/1/20) 900,000
Change fund 10,000
Bond sinking fund 1,000,000
**current exchange rate as of December 31, 2020 is at P50 for every USD1.
Requirements:
94. What is the total cash and cash equivalent to be reported by the company in its December
31, 2020 balance sheet?
a. 9,262,000 c. 8,362,000
b. 8,380,000 d. 8,122,000
95. How much from the list above should be presented as part of Noncurrent assets?
a. 1,000,000 c. 4,900,000
b. 4,000,000 d. 5,500,000
PROBLEM 29:
UHAWSAIYO COMPANY
General and Petty Cash Count
Audit Year: 2020
Date of count – January 5, 2021, 9:10 am
Bi
Billlls
s and Coin
oi ns

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Denom. Bundles of 100 pcs Rolls of 50 coins Loose
P500 1 9
100 2 27
50 3 5
20 5 4
10 10
5 6 4
1 10 20
.25 40 16
Checks
Maker Payee Date Amount
T. Otis – customer Uhawsaiyo 12/30/20
12/30/20 P11,920
R. Eyes – customer Uhawsaiyo 12/26/20
12/26/20 12,505
O. Liever – customer Uhawsaiyo 1/2/21 5,707
F. Rancisco – customer Uhawsaiyo 12/21/20
12/21/20 13,350
Uhawsaiyo ABC Co. 12/27/20
12/27/20 14,500
M. Doza – officer Cash 1/5/21 310
O. Campo * Cash 12/29/21
12/29/21 260
*Amount is for a return of travel advance made to the employee in an earlier period.
Vo
Vouuch
cher
erss an
andd IO
IOUS
US
Pa
Paid
id to Da
Date
te Amou
Am ount
nt
PNR – transportation expense 1/2/21 P35
Post office – postage stamps 12/20/
12/20/20
20 150
Italian Village – Christmas party 12/23/20
12/23/20 6,290
I. Dio – IOU 12/27/20
12/27/20 300
Others
1. Cash sales invoices (all currencies No. 17903
17903 to 18
18112),
112), P100,500
2. Official receipts
Number Amount Form of Collection
31250 P560 Cash
31251 12,505 Check
31252 1,202 Cash
31253 11,920 Check
31254 13,350 Check
3. Stamps of various denomination amounted to P8

P80.
0.
4. A notation on a sheet of paper as follows:

follows:
“Proceeds from employee contribution for Christmas Party, P9,500”
5. Petty cash per ledger, P15,000

P15,000..
Required:
96. How much is the petty cash shortage as of January 5, 2021?
a. 13,913 c. 15,303
b. 14,503 d. none
97. The adjustment to correct petty cash fund involves a credit to petty cash fund at:
a. 15,000 c. 14,988
b. 14,953 d. 14,688
98. What is the adjusted petty cash fund as of December 31, 2020?
a. 0 c. 12
b. 47 d. 312
PROBLEM 30:
The Silver Company’s internal control over its cash transaction is very weak. The company’s
cash position at December 31, 2020 were as follows:
The cash book showed a balance of P15,000, which included cash on hand. A credit of P150 on
the bank’s records did not appear on the company’s books. The bank statement showed a
balance of P12,300; and the outstanding checks were: 0100 – P120; 0201 – P100; 0300 –

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P230; 1501 – P110; 1510 – P140; and 1515 – P150.
The cashier removed all of the cash on hand in excess of P3,000 and then prepared the following
reconciliation:
Balance per books, Dec. 31, 2020 P15,000
Add: Outstanding checks:
No. 1501 P110
1510 140
1515 150 300
P15,300
Deduct: Cash on hand 3,000
Balance per bank, Dec. 31, 2020 12,300
Deduct: Unrecorded credit 150
True cash, Dec. 31, 2020 P12,150
99. What is the cash shortage?

a. 300 c. 500
b. 400 d. 700
100..
100 A c
correct
orrect reconciliation will show that the cashier’s accountability for
for cash o
on
n hand
hand is:
a. 3,300 c. 3,500
b. 3,400 d. 3,700
101..
101 The adjus
adjusted
ted cash
cash in bank excluding
excluding cash on hand
hand as of December 31,31, 20
2020
20 is:
is:
a. 11,300 c. 11,600
b. 11,450 d. 11,850
102..
102 The adjus
adjusted
ted cash
cash balance to be reported in the
the Statement of Financial Position as of
December 31, 2020:
a. 14,300 c. 14,600
b. 14,450 d. 14,850
PROBLEM 31:
You were assigned to audit the cash account of TMR Corp. in line with your firm’s audit of its financial
statements for the year ended December 31, 2020. The following resulted from your substantive test
procedures:
BANK
BA NK RE
RECO
CONC
NCIL
ILIA
IATI
TION
ON
The cashier prepared the bank reconciliation statement as of December 31, 2020, which included the
following information:
Bank loan proceeds credited by the bank in December,
recorded in the books in January 3 P250,000
Bank service charge for December, recorded in books in
January 3 15,600
Outstanding checks, P34,550 of which has been certified 186,500
by the bank
Check of MRT Inc., charged by the bank in error on
December 28, 2020; corrected by the bank on 45,900
January
Deposit in 2, 2021 as per the cut-off bank statement
transit 54,500
Cash per general ledger, December 31, 2020 293,200
Cash per bank statement, December 31, 2020 628,570
Audit notes:
a. A cash collections from ccustomers
ustomers in De
Decembe
cemberr amounting to P35,000 was recorded in the
books at P3,500.
b. A P2,500 chcheck
eck issued to a supplier in December was recorded in the
the books at P25,000.
CASH
AS H COUN
CO UNT
T
From January 2, 2021, to January 10, 2021, the date of your cash count, total cash receipts appearing in
the cash records (debited to cash) for the said period amounted to P317,550. During the same period,
total bank credits amounted to P156,790 as per the cut-off bank statement. The following cash and cash
items were on hand at the close of business on January 10, 2021:
Currencies and coins P4,275
Customers’ checks
Dated January 4, 15,200
Dated January 6, NSF 4,000
Dated January 10 10,775
Expense vouchers 22,250

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PRODUCTION CYCLES -
Audit notes:
a. Check deposit
deposit on January 5, 2021, amounting to P12,000
P12,000 was not recorded in the books.
b. Undeposited collections on January 10, 2021 amounting to P27,

P27,000
000 was also not yet rec
recorde
orded
d in
the books.
Requirements:
103. What is the correct cash in bank balance
balance as of Decemb
December
er 31, 2020?
a. 546,200 c. 577,020
b. 453,620 d. 581,600
104. What is the cash shortage as of December 31, 2020?

a. 8,080 c. 5,080
b. 4,580 d. 2,580
105. What is the

the actual total customer collections from Ja
Januar
nuary
y 2 to January 10?
a. 67,550 c. 50,160
b. 56,390 d. 106,550
106. What is the cash shortage from

from undeposited collections
collections from January 2 tto
o January
January 10?
10?
a. 2,340 c. 41,340
b. 1,660 d. 19,910
PROBLEM 32:
You are auditing the cash account of Carrera Inc. for the fiscal year ended July 31, 2020. The client has
not prepared the July 31, bank reconciliation. The following information were made available:
General Ledger Bank Statement

Beginning balances P140,330 P172,590
Deposits 751,680
Cash receipt
receipts
s journal 763,680
Checks clearing the bank (708,450)
Cash disbursements (654,330)
journal
July bank service charge (2,610)
Note paid by the bank (183,000)
NSF check (9,330)
Ending
Endin g balances
balance s P249,680 P20,880
Audit notes:
a. Bank reconciliation in June included the following information: Bank
Bank stat
statement
ement balance,
June, P172,590; Deposits in transit, P18,000; Outstanding checks, P52,26
P52,260,
0, and; Balance
per general ledger, June, P140,330.
P140,330.
b. Checks clearing the bank in July

July,, outstanding by the end of Jun
June
e was at P50,760.
c.Checks clearing the bank in July and were recorded

recorded in the July cash disbursement journal was at
P614,010.
d. A check for P31

P31,80
,8000 cleared the bank, b
but
ut had not been recorded in the cash disb
disbursement
ursement
journal. It was for a payment of an accounts payable.
e. A check for P11,

P11,880
880 was erroneously charged by the bank to Carrera Inc
Inc..
f. Deposits included P18,000 from June and P733,680 from July.
g. The bank charged Carrera Inc.’s account

account for a non-sufficient-fund check
check totaling to P9
P9,330.
,330.
The credit
credit manager concluded that the customer intentionally closed its account and the
owner left
left the city. The check was turned
turned over to a collection agency.
agency.
h. A note for P1
P174,
74,000
000,, plus interest, was paid directly
directly by the bank under an agreement
signed four months ago. The no note
te payable was recorded at P174,000 on Carrera Inc.’s
books.
Required: Based on your audit procedures and appreciation of the above data, answer the following:
107.
107. How much is the total outstanding checks as of July 31?
a. 29,940 c. 41,820

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PRODUCTION CYCLES -
b. 32,490 d. 10,020
108..
108 How much is the deposit in transit as of
of July 31?
a. 20,940 c. 18,000
b. 30,000 d. 27,330
109.
109. What is the correct
correct cash in bank
bank balance as
as of July 31?
a. 20,940 c. 32,820
b. 11,160 d. 9,060
110. How much is the cash in bank shortage as of June 31?
a. none c. 2,000
b. 1,200 d. 2,200
PROBLEM 33:
In the course of our audit of Volumatic Inc.’s cash in bank for the year ended December 31, 2020,
you ascertained the following information:
November 30 December 31
Cash per books P82,350 P201,425
Cash per bank statements 535,410 689,085
Undeposited collections 41,005 64,400
Outstanding checks 138,590 150,560
Bank service charges 3,600 3,000
Insufficient fund check 41,250
Company’s notes receivable
collected by bank 359,075 404,500
The bank statement and the company’s cash records show the following totals:
Checks and debit memos per bank statement ` P1,091,865

Cash receipts per cash records ?
Cash disbursements per cash records ?
Deposits and credit memos per bank statement 1,245,540
The insufficient fund check was redeposited in the same month. No entries are made to take up the return
and redeposit.
Requirements:
111.
111. What is the unadjusted book receipts in December?
a. 1,227,685 c. 1,160,
1,160,660
660
b. 1,182,260 d. 823,185
112..
112 What is the unadjsuted book disbursements in December?
a. 1,059,585 c. 1,063,785
b. 1,063,185 d. 1,066,185
113.
113. What is the adjusted book balance on November 30 30?
?
a. 434,825 c. 441,425
b. 437,825 d. 445,025
114.
114. The adjusted bank receipts in December should be:
a. 1,268,935 c. 1,265,335
b. 1,268,337 d. 1,245,540
115..
115 The adjusted bank disbursements in December should be:
a. 1,105,035 c. 1,097,835
b. 1,103,835 d. 1,091,865
116..
116 What is the adjusted book balance on December 31?
a. 561,075 c. 605,325
b. 602,925 d. 644,175
PROBLEM 34:
Shown below is the May 31, 2020, bank reconciliation prepared by HALALAN CORP.’s staff:
Halalan Corp.
Bank Reconciliation: BPI Acct No. 0021261 May
31, 2020
Bank balance P652,000
Add: Deposit in transit 10,000
10,000
Total P662,000

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PRODUCTION CYCLES -
Less: Outstanding checks
No. 640 P10,000
652 8,000
653 2,000 20,000
Adjusted balance P642,000
P642,000
Book balance P570,800

Add: Proceeds of note receivable collected in May P70,000
Deposit on May 31 not recorded on books
Total until June 2,000 72,000

P642,800
Less: Bank service charge 800
P642,000
The June 2020 bank statement is shown below:
Bank of the Philippine Island From

May 31, 2020 to June 30, 2020
Account No.: 0021261
Date Checks Deposit
June 1 P8,000 P10,000
June 8 2,000
June 11 14,000 20,000
June 13 1,000 DM 1,000
June 16 4,000
June 21 12,000 56,000
June 27 18,000
June 29 1,000 EC 1,000 EC
June 30 200 SV June 30
3,000 DM
SV – Service Charge
Charge DM – Debit Memo
EC – Error Corrected CM – Credit Memo
The paid checks accompanying this bank statement (all clearing in June) are the following:
No. 652 P8,000
No. 653 2,000
No. 654 14,000
No. 655 4,000
No. 657 12,000
No. 658 18,000
The check register reveals that the last check issued in June is No. 659 for P5,000 and that check no. 656
is for P2,600. Cash received for the period June 22 through June 30 of P70,000 was deposited in the bank
on July 1. The bank erroneously charged the company P1,000 on June 29 but immediately corrected the
error on the same date.

The debit memos on June 13 and June 30 represent customers’ NSF checks returned by the bank. The
June 13 NSF check was immediately redeposited without entry. The June 30 NSF check was redeposited
on July 1 without entry.
117..
117 What is the total
total bank rec
receipts
eipts in June
June per b
bank
ank statement?
a. 87,000 b. 88,000 c. 77,000 d. 78,000
118.
118. What is the total
total bank d
disbursements
isbursements in June
June per bank statement?
a. 59,200 b. 58,000 c. 58,200 d. 63,200
119..
119 What is the balance
balance per bank statement on June
June 30, 2020?
a. 676,800 b. 627,200 c. 732,400 d. 729,200
120.
120. What is the total receipts in June per books?
a. 88,000 b. 220,000 c. 146,000 d. 218,000
121.
121. What is the total disbursement in June per books?
a. 53,000 b. 57,400 c. 56,400 d. 63,200
122. What is the cash balance per books on June 30, 2020?
a. 732,200 b. 729,200 c. 732,400 d. 676,800

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PRODUCTION CYCLES -
PROBLEM 35:
You are auditing the cash of Saluyot Corp. for the fiscal year ended September 30, 2020.
The bank reconciliation prepared by the accountant of Saluyot Corp. for the months of August is
presented below:
Bank balance, per bank statement P156,000
Add: Deposit in transit, August 31

Total 2,700
158,700
Less: Outstanding checks:
No. 547 P600
561 5,400
562 4,200
565 1,800 12,000
Book balance, per general ledger P120,000

Add: Proceeds of note receivable collected
by bank in August 24,000
Deposit made in bank on August 31
not recorded on books until
September 3,000
Total 147,000
Less: Bank Service charge 300
There was no available bank reconciliation for the month of September, instead, the accountant provided
you a copy of the September bank statement to aid you in your audit.
The September bank statement included the following bank debits and credits:
Date Particulars Debits Credits
August 31
September 1 Chk #561 5,400 2,700
September 6 Chk #562 4,200
1,800 30,000
September 12 420 DM 420
September 17 600
September 20 Chk #567 2,100 42,000
September 29 300 EC 300 EC
September 30 1,320 SV
September 30 900 DM
SV—Service charges DM—Debit Memo
EC—Error Corrected CM—Credit Memo
Further investigation revealed the following information:
a. All book reconciling

reconciling items during August has
has been recorded in September
b. The check register revealed

revealed that the last check issued
issued in September was No. 571 for
P3,000 and that check
check No.568 was P7,200.
c. Cash receiv
received
ed for the period September 25 through 31 of P2
P28,200
8,200 was deposited
deposited in the
bank on October 1.
d. The debit memo on S September

eptember 12 an
and
d September 3030 were customer NSF checks returned
by the bank. The check on Septembe
Septemberr 12 was immediately redeposited without entry. The
check returned on September
September 31 was redep
redeposited
osited by tthe
he client in the bank on October
October 1
also without entry.
e. Among the bank credits for the

the month was P600 deposit
deposit of Baluyot C
Corp.
orp. credited by the
bank to the company’s account.

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PRODUCTION CYCLES -
Required: Based on your audit procedures and appreciation of the above data, answer the following:
123. How much is the unadjusted bank balance as of September 30, 2020?
2020?
a. 101,100 b. 109,200 c. 192,900 d. 202,800
124. How much is the total book receipts for Septemb
September?
er?
a. 75,420 b. 106,620 c. 127,200 d. 129,900
125.
125. How much is the total book disbursements fo
forr September?
a. 25,080 b. 25,380 c. 26,280 d. 29,220
126. How much is the unadjusted book balance

balanc e as of September 30, 2020?
2020?
a. 221,820 b. 222,120 c. 224,620 d. 224,920
127. How much is the adjusted

adjuste d cash balance as of September 31, 2020?
2020?
a. 219,000 b. 219,600 c. 220,200 d. 221,820
PROBLEM 36:
The following information was obtained in connection with the audit of Wise Company’s cash
account as of December 31, 2020:
Outstanding checks, 11/30/2020
11/30/2020 P16,250
Outstanding checks, 12/31/2020
12/31/2020 12,500
Deposit in transit, 11/30/2020
11/30/2020 12,500
Cash balance per general ledger 12/31/2020
12/31/2020 37,500
Actual company collections from its customers during December 152,500
Company checks paid by bank in December 130,000
Bank service charges recorded on the company books in
December 2,500
Bank service charges per December bank statement 3,250
Deposits credited by bank during December 145,000
November bank service charges recorded on company books in
December 1,500
The cash receipts book of December is underfooted by P2,500.
The bank erroneously charged the company’s account for a P3,750 check of another depositor. This
bank error was corrected in January 2021.
128..
128 How much is the deposit in transit
transit on
on December 31, 20
2020
20?
?
a. 5,000 b. 20,000 c. 22,500 d. 17,500
129. The total unrecorded
unrecor ded bank service charges as of December 31, 2020?
2020?
a. 750 b. 2,250 c. 1,750 d. 4,250
130..
130 What is the total book receipts in December?
a. 150,000 b. 152,500 c. 155,000 d. 147,500
131..
131 What is the total
total amount ooff company checks issued
issued in December?
a. 130,000 b. 123,000 c. 133,750 d. 126,250
132..
132 What is the total book disbursements in December?
a. 123,750 b. 128,500 c. 126,250 d. 128,750
133. What is the book balance on November 30, 2020?
2020?
a. 16,250 b. 21,250 c. 37,500 d. 35,000
134..
134 What is the bank balance on November 30, 20
2020
20?
?
a. 23,000 b. 18,500 c. 43,500 d. 16,250
135..
135 What is the total bank receipts in December?
a. 120,000 b. 140,000 c. 145,000 d. 150,000
136..
136 What is the total bank disbursements in December?
December?
a. 154,500 b. 132,500 c. 129,500 d. 137,000
137..
137 What is the bank balance
a. 21,500 on December c.
b. 26,500 3
31,
1,31,000
20
2020
20?
? d. 33,250




PRODUCTION CYCLES -
PROBLEM 37:
In your audit of I-Bot Inc.’s cash account as of December 31, 2020, you ascertained the following
information:
The bookkeeper’s bank reconciliation on November 30, 2020, is as follows:

Bank balance per bank statement, November 30 P24,298
Add: Deposit in transit 3,648
Total P27,946
Less: Outstanding checks
No. 3408
3413 P440
300
3414 6,820
3416 3,924
3417 800 12,284
Balance P15,662
Add: Bank service charge for November 36 *
Balance per books P15,698
*Entered in Check Register in December
The Cash Receipts Journal shows a total receipts for December of P371,766. The Check Register reflects
total checks issued in December of P377,632. A collection of P5,912 was recorded on company books on
December 31 but was not deposited until January 2, 2021.
The balance per bank statement at December 31, 2020, is P17,516. This statement shows total receipts of
P373,502 and checks and other charges paid of P380,284.
Your examination revealed the following additional information:
a. Check no. 3413

3413 dated November 24, 2020,2020, was entered in the Check Register as P300. Your
examination of the paid returned with the December bank statement reveals that the
amount of the check is P30.
b. Check no. 343417
17 was mutilated and returned by the payee. payee. A replacement check (no.
3453)
3453) was issued. Both checks were entered in the Check Regist Register
er but no entry was
made to cancel check no. 3417.
3417.
c. The December bank st statement
atement includes an erroneous bank charge of P48 P480.
0.
d. On January 3, 202
2021,1, the bank informed yyour
our client that a December
December bank charge of P42
was omitted from the statement.
e. Your examination of the bank credit
credit memo accompanying
accompanying the December bank statement
discloses that it rrepresents
epresents proceeds from the nonote
te collection in December for P4,000.
f. The outstanding
outstanding checks at December 31, 31, 202
2020,
0, are as follows:
No. 3408 P440
No. 3417 800
No. 3418 2,814
No. 3419 5,788
138
138.
. What is the total
a. 377,668 total book
b.disbursements
377,710 forc.the month of December?
377,632 d. 377,596
139..
139 What is the book
book balance at December 31?
a. 9,832 b. 9,868 c. 9,754 d. 9,796
140..
140 What is the total outstanding checks at December 31?
a. 8,602 b. 9,072 c. 9,042 d. 9,842
141..
141 What is the adjusted bank balance on November 30
30?
?
a. 16,690 b. 16,732 c. 16,804 d. 16,774
142.
142. What is the adjusted
adjusted book receipts for the month of
of December?
a. 375,724 b. 371,766 c. 371,238 d. 375,766
143.
143. What is the adjusted
adjusted book disbursements for the month of December?
a. 377,590 b. 377,662 c. 377,674 d. 377,632
144..
a. 14,824 b. 14,866 c. 14,908 d. 14,782




PRODUCTION CYCLES -
PROBLEM 38:
Halal Corp. has a current account in PNB. Your audit of the company’s cash account reveals the
following:
a. Balances taken from the comp

company’s
any’s general ledger:
ledger:
Cash balance, November 30, 2020 P637,860
Cash balance, December 31, 2020 576,420
Receipts, December 1 – 31, 2020 306,220
b. Balances taken from the December bank statement:

statement:
Bank balance, November 30, 2020 P685,180
Bank balance, December 31, 2020 637,220
Disbursements (debit) 356,080
c. Outstanding chec
checks,
ks, November 30,
30, 2020
2020 (P26,140 was paid by the bank in Dec
December),
ember),
P64,140.
d. Checks written and record

recorded
ed in December; not included in the checks retu
returned
rned with the
December
Decemb er bank statement
statement,, P36,080.
P36,080.
e. Deposit in transit
transit,, November 30, 202
2020,
0, P15,260.
P15,260.
f. Deposit in transit,
transit , December 31, 2020,
2020, P16,140.
g. A bank credit memo was is

issued
sued in De
December
cember to correct an erroneous charge made
made in
November, P1,500.
h. Note collect
collected
ed by bank in December (c
(company
ompany was not informed of the collection),
P2,060.
i. A check ffor
or P2,02
P2,020
0 (payable tto
o a supplier) was recorded in the Check Register
Register in
December
Decemb er as P3,000.
P3,000.
j. A check for P2,24

P2,240
0 was charged by the bank as P2,
P2,420
420 in December.
k. Halal Co. issued

issued a stop
stop payment order to bank
bank in December. This pertains
pertains to a check
check
written in December which was not received by the
the payee. A new check was written and
recorded in the
the Check
Check Register in December.
December. The old
old check was written
written of
offf b
by
y a journal
entry also in December, P780.
P780.
l. Bank s
service
ervice charge, November 30, 2020,
2020, P60.
Requirements:
145..
145 What is the total book disbursements in December?
a. 367,660 b. 244,780 c. 369,720 d. 368,540
146..
146 What is the total bank receipts in December?
a. 260,160 b. 308,120 c. 306,060 d. 309,020
147..
147 What is the total outstanding check on December 31?
a. 100,220 b. 38,000 c. 62,220 d. 74,080
148..
148 What is the adjusted bank balance on November 30
30?
?
a. 636,300 b. 685,180 c. 637,800 d. 634,800
149..
149 What is the adjusted book receipts in December?
a. 307,500 b. 306,220 c. 303,380 d. 305,440
150.
150. What is the adjusted bank disbursements in December?
a. 353,980 b. 365,840 c. 345,960 d. 366,020
151..
a. 577,500 b. 577,400 c. 576,420 d. 579,460



ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500S

CYCLES - AUDIT OF INVENTORY
I NVENTORY RECEIVABLES AND CASH
AP-500S: PURCHASING/DISBURSEMENT , REVENUE/RECEIPT AND
PRODUCTION CYCLES
– AUDIT OF CURRENT ASSETS: INVENTORIES, RECEIVABLES AND CASH

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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

AUDITING (Auditing Problems) S. IRENEO C. ESPENILLA

AP-500Q: PURCHASING & DISBURSEMENT, REVENUE & RECEIPT

You are conducting a financial statements P ROofBUnilab

PO Date Invoice Date Quantity Shipping Date Delivery/Recei

Page 1 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

included in the physical count

Requirements: Based on the result of your audit ascertain the following:

Page 2 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

b. Goods costing P33

c. Goods costing P40,000 were shipped FOB shipping

e. Goods costing P22,000

g. Ivy Inc., reco

Inventory at December 31, 2020 (based on physical count in Bird’s

Page 3 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

Your audit reveals the following information:

recorded as December sales.

b. Goods shipped FOB shipping po

c. Work in process inventory costing

d. Not included in tthe

g. Included in the physic

h. A monthly freight bill for P1

Page 4 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

The physical inventory compilation includes P750 of merchandise received on

Requirements: Adjusted balances at December 31, 2020 of:

Page 5 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

A review of December transactions disclosed the following:

2. A production report for P2

3. Sales invoice no. 142

5. On December 27 the Pampanga warehous

6. A report for the production on January 3 of P2,500

8. The working papers of tthe

Page 6 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

Sales, January 1 through May 2, 2020 P380,000

Page 7 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

30. Average Approach

Page 8 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

The Savior Corporation uses the lower of P RO

Quantity Cost NRV Amount

The general ledgers showed the following balances:

Page 9 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

Finished Goods Item M Item P Item Q

Raw Materials – Item M A B C

Page 10 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

a. The general ledger balances of the

b. Inuyasha Inc. estimates its bad debt

c. The company normally sells n/30.

Page 11 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q

Accounts receivable P1,466,720

The accounts receivable subsidiary ledger had the following details:

Page 12 of 29 0915-2303213/0908-6567516 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q