Accounting C614 Auditing and Assurance: Specialized Industries (2ND SEM SY 2022-2023)

FINAL PROJECT

The following Statement of Financial Position was prepared by the accountant for Agri-Gulay Corp. for you
to audit.

Agri-Gulay Corp.
Statement of Financial Position
December 31, 2022

Assets
Cash ................................................... P 271,500
Investment securities .................................. 315,000
Accounts receivable .................................... 270,000
Inventories ............................................ 501,000
Total current assets ................................. P1,357,500
Land, buildings, and equipment ......................... 1,452,000
Total assets ........................................... P2,809,500

Liabilities and shareholders' Equity

Accounts payable ....................................... P 342,420
Estimated losses from future crop failures ............. 360,000
Salaries payable ....................................... 150,000
Total current liabilities ............................ P 852,420
10% Bonds payable (due in 10 years) .................... 525,000
Capital share .......................................... 450,000
Retained earnings ...................................... 982,080
Total liabilities and shareholders' equity ............. P2,809,500

Audit Evidence

Your audit disclosed the following when you gathered evidences to support your audit report:

(a) Cash is held in a checking account and a savings account with balances of
P69,450 and P202,050, respectively. The cash in the savings account will
be used to support operations in the event of a crop failure.
(b) A loan to the president for P180,000 that is to be repaid in quarterly
installments of P15,000 is included in "Accounts receivable." Other
accounts receivable are considered to be 95 percent collectible.
(c)
Inventories include:
Finished products ................................ P390,000
Supplies ......................................... 19,500
Storage buildings (net of P30,480 depreciation) .. 91,500
Total .......................................... P501,000

(d) "Land, buildings, and equipment" includes 5 tractors that were purchased
near the end of the year for P360,000 (shown net of a P300,000, 5-year
loan used to buy the tractors). The balance of the account consists of land
that was purchased for P1,200,000 and buildings that were purchased for
P255,000 (shown net of depreciation of P63,000).
(e) Included in "Accounts payable" are P105,000 of advances from customers
for delivery of goods in August of the next year.
 (f) The company has 90,000 shares of P5 par ordinary share issued and
outstanding. The ordinary share was originally sold for P7 per share, and
the premium was included in "Retained earnings."

(g) After reading a PAGASA report from the news paper, the president
believes that next year will be a bad crop year due to super typhoon and
estimates the company will lose about P360,000. An appropriation of
Retained Earnings has been made for this amount.

As external auditor of Agri-Gulay, prepare a properly classified and corrected Statement of Financial
Position to be recommended to the corporation.

Give all the audit adjustments to correct the presentation of the statement of
financial position.

ANSWERS:

Agri-Gulay Corp
Statement of Financial Position
December 31, 2022
ASSETS
Current Assets
Cash 69, 450
Investment securities 315,000
Accounts receivable, Net* 85,500
Inventories 390,000
Advances to officers 60,000
Supplies 19,500
Total current assets 939,450
Non-Current Assets
Cash fund for future Losses 202,050
Land, Buildings, Equipment* 1,843,500
Advances to officers 120,000
Total non-current assets 2,165,550
Total assets 3,105,000

LIABILITIES
Current Liabilities
Accounts payable 237,420
Salaries payable 150,000
Advances from customers 105,000
Total current liabilities 492,420
Non-Current Liabilities
5-Year Loan Payable 300,000
10% Bonds payable (due in 10 years) 525,000
Total non-current liabilities 825,000
Total liabilities 1,317,420
SHAREHOLDER’S EQUITY
Contributed Capital* 630,000
Retained earnings* 1,157,580
Total shareholders' equity 1,787,580
Total liabilities and shareholders' equity 3,105,000

(1) Accounts Receivable 90,000

Less: Allowance for Doubtful Accounts 4,500
Total 85,500

(2) Land 1,200,000

Buildings 376,980
Equipment 360,000
Less: Accumulated Depreciation Building & Equipment 93,480
Total 1,843,500

(3) Common Stock (P5 par x 90,000 shares) 450,000

Additional Paid-In Capital/Share Premium 180,000
Total 630,000

(4) Appropriated for future losses 360,000

Unappropriated (982,080 - 4,500 - 180,000) 797,580
Total 1,157,580

SOLUTION:

CASH:
271,500 – 202,050 = 69,450

ACCOUNTS RECEIVABLE:
270,000 – 180,000 – 4,500 = 85,500

ADVANCES TO OFFICERS:
15,000 * 4 = 60,000

INVENTORIES:
501,000 – 19,500 – 91,500 = 390,000

LAND, BUILDING, EQUIPMENT:

1,200,000 + 376,980 + 360,000 – 93,480 = 1,843,500

ACCOUNTS PAYABLE:
342,430 – 105,000 = 237,420

ADDITIONAL PAID IN CAPITAL:

90,000 * 2 = 180,000

RETAINED EARNINGS:
360,000 + 982,000 – 4,500 – 180,000 = 1,157,500

ADJUSTMENTS:

(1) Restricted Cash 202,050

Cash 202,050

(2) Non-Trade Receivable 180,000

 Accounts Receivable 180,000

Retained Earnings 4,500

Accounts Receivable 4,500

(3) Supplies 19,500

LBE/PPE 91,500
Inventories 111,000

(4) LBE/PPE 240,000

Retained Earnings 240,000

(5) Accounts Payable 105,000

Unearned Revenue 105,000

(6) Retained Earnings 180,000

Share Premium 180,000

(7) Estimated Losses 360,000

Appropriated R/E 360,000