AUDITING PROBLEMS

SHARE-BASED PAYMENT

TYPES
EQUITY-SETTLED
SHARES MFAS. – FV AS OF GRANT DATE
SHARE OPTION WHEN – OVER THE VESTING PERIOD

SETTLEMENT/ACCELERATION

1. RECOGNIZE IMMEDIATELY ANY REMAINING AMOUNT UNRECOGNIZED

2. IF PAYMENT:
PAYMENT > FV AS OF THE SETTLEMENT DATE -> EXCESS IS RECOGNIZED AS EXPENSE

MODIFICATION

1. CONTINUE TO RECOGNIZE EXPENSE BASED ON ORIGINAL CONDITION.

2. TYPES OF MODIFICATION
a. BENEFICIAL TO EMPLOYEES – increase in fair value of share option -> additional expense over
the remaining vesting period.
b. NOT BENEFICIAL – Ignore

FINANCIAL ACCOUNTING AND REPORTING

INVENTORY ESTIMATION

1. INTERIM FS – USED BY LISTED COMPANIES

2. RESONABLENESS OF PERPETUAL INVENTORY RECORDS
3. ESTIMATED LOSS ON THEFT – estimated (should be balance) > actual
4. ESTIMATED LOSS ON CATASTROPHE

GROSS PROFIT METHOD

TGAS = COGS + ENDING INVENTORY

ENDING INVENTORY = TGAS – COGS

BEG. INV.
+ PURCHASES
+ FREIGHT IN
- PURCH. RETURNS
- PURCH. DISCOUNTS
- PURCH. ALLOWANCE
= TOTAL GOODS AVAILABLE FOR SALE

NET SALES = COGS + G. PURCHASES

COGS = NET SALES – G. PURCHASES
NET SALES = GROSS SALES – SALES RETURNS
**TRICK IF NET SALES IS GIVEN: NET SALES = “NET SALES” + SALES DISC. + SALES ALLOWANCE

COGS = NET SALES X (1-GROSS PROFIT RATE BASED ON SALES) * IF SILENT

COGS = NET SALES
(1 + GROSS PROFIT RATE ON COST)
THEORY QUESTIONS

7. D

PROBLEM #6 B

TGAS = 450K + 2160K – 60K – 12K + 21600 = 2559600

RETAIL INVENTORY METHOD

END. INV. @ RETAIL = TGAS – COGS @ RETAIL (NET SALES)

GROSS SALES
LESS SALES RETURNS
ADD NORMAL LOSSES
EMPLOYEE DISCOUNTS
NET SALES

END INV. @ RETAIL X COST RATIO = END INV. @ COST

1. AVERAGE *if silent
= TGAS @ COST / TGAS @ RETAIL

2. LCNRV/CONVENTIONAL
= TGAS @ COST / (TGAS @ RETAIL + NET MARK DOWN)
3. FIFO
= TGAS @ COST – BEG INV. @ COST / TGAS @ RETAIL – BEG. INV @ RETAIL

THEORY #8 B

PROBLEM 7 C

BIOLOGICAL ASSET (PAS 41)

- LIVING ANIMALS OR PLANTS

AGRICULTURAL PRODUCE – HARVESTED PRODUCT FROM BIOLOGICAL ASSETS

BIO ASSET AGRI. PRODUCE (UNPROCESSED) PROCESSED

PIGS CARCASS HOTDOG
SHEEP WOOL CARPET/YARN
FRUIT TREES PICKED FRUITS DRIED/CANNED
PALAY PALAY GRAIN RICE

ANIMALS PLANTS
CONSUMABLE PAS 41 PAS 41
BEARER PAS 41 PAS 16

PAS 41 INITIAL SUBSEQUENT

BIO ASSETS FVLCTS FVLCTS – PL
AGRI PRODUCE FVLCTS LCNRV
@ the point of harvest
FAIR VALUE LESS COST TO SELL – PL

PRICE CHANGE – GENERAL MARKET VALUES (SAME AGE BEG, DIFFERENT DATE)

PHYSICAL CHANGE – CHANGES IN ATTRIBUTES (SAME DATE END, DIFFERENT AGES)

PROCREATION

THEORY QUESTIONS
1. B
2. B

LOSS: PURCHASE PRICE > FVLCTS

GAIN: PURCHASE PRICE < FVLCTS
3. D
4. A

PROBLEM 1 BIO ASSET: 3900 INVENTORIES: 1100

PROBLEM 2 3400
FV= QUOTED PRICE – TRANSPORT COST
*CHARACTERISTICS OF ASSET
*LOCATION

PROBLEM 3 D

PROBLEM 4 D, D

PROPERTY, PLANT, AND EQUIPMENT (PAS 16)

CHARACTERISTICS
ALL OF THE FF MUST BE MET
1. TANGIBLE
2. USABLE FOR MORE THAN ONE PERIOD
3. ANY ONE OF THE FOLLOWING PURPOSE
a. TO SUPPLY GOODS/SERVICES
b. FOR RENTAL TO OTHERS (IMMOVABLES)
c. FOR ADMINISTRATIVE PURPOSES

INITIAL MEASUREMENT = @COST

1. PURCHASE PRICE
2. DIRECTLY ATTRIBUTABLE COST
a. TESTING *PROCEEDS FROM SAMPLE UNITS – OTHER INCOME (UPDATED 1/1/22)
* IF PROBLEM IS DATED EARLIER THAN 1/1/22 – DEDUCT FROM COST
b. SITE PREPARATION
c. HANDLING
d. ASSEMBLY
3. ESTIMATED DISMANTLING COSTS - asset retirement obligations

THEORY QUESTIONS

5 C
6 D
7
8 A