CPA REVIEW SCHOO! OF THE PHILIPPINES AUDITING PROBLEMS FINAL PRE-BOARD EXAMINATION PROBLEM 1~ ISABEL COMPANY 4. D__lnventory, November 30 Understatement Correct inventory, Nov. 30 Cost of sales ~ December Direct labor ‘Overhead (200% x P690,000) Materials used ~ December Excessive scrap ~ December Materials issued ~ December Inventory, Nov. 30 Direct labor ~ Nov, ‘Overhead — Nov. (200% x P500,000) Materials November 30 Purchases — December Materials available for use Materials issued ~ December Materials inventory, December 31 PROBLEM 2 ~ PANDAY POKPOK COMPANY 6. A. Bills and coins Checks 10Us Petty cash vouchers Total count ‘Accountabilties: Petty cash fund Undeposited collections (P17,300 ~ P15,300) Unclaimed salaries (P685 + P495) ‘SHORTAGE PROBLEM 3~ TORNADO COMPANY 1A Amortization: Manila September 14, 2014 P2,913,500 4, © Direct labor - Nov. 500,000 150,000 Direct labor ~ Dec. 605,000 3,063,500 Total 1/105,000 Direct labor in cost of sales 3,447,500 = December (620,000) (690,000), Direct labor in inventory (2,380,000) ~ December 2.415.000 1,347,500 _" 4.000 §. A Materials~Dec. 31 PA, 232,500 387.500 Direct labor ‘415,000 Overhead (200% x P415,000) 830,000 2,885,000 Total inventory, Dec. 31° 2.477.500 (500,000) (1,900,000) 1,385,000, 1.235,200 2,620,000 (1,387,500) PL232000 Ps200 07, D 2000 «8. =B ys00 9. A 2668 10. D Pia, 363 18,000 2,000 41160 21,160 P6297 Per Books Per Ault Cost. 2,500,000 2,250,000 (500,000) (590,000) Residual value Depreciable cost Correct depreciation for 9 months (P1,750,000/5 x 9/12) 262,500 Depreciation per books 300,000 ‘Overdepreciation B37500 12. B Per Books er Aut SY Cost 4,750,000 1,675,000 ‘ Depreciation (350,000) (335,000) 5 Canying value 4,400,900 Bi.340,000 13, © Tradein value 75,000 Carrying value 220,000 Loss on exchange 195.000 14, A Fair value of Machine D 1,650,000 Net realizable value of accounts recelvable (P2,100,000 x 80%) +1680,000 Loss on exchange 220.000 15. A Cost of treasury shares (carrying value of Machine D) - 21,650,000 PROBLEM 4 ~ BALWARTE COMPANY 16. B Patents per books, December 31, 2014 1,650,000 UUnamortized balance of P225,000 incorrectly charged to Patents in January 2011 (P225,000 x 7/10) (157.500) Corrected balance before 2014 amortization P.492,500 17, B_ Costof Patents, December 31, 2014 1,492,500 Patents having 2 years remaining fife Page 1 of & PagesCPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) - MANILA ‘BUDUTING PROS cen a os aU 18, 19. 20. (P630,000 x 7/14 = P315,000/2) Remaining patents (P1,492,500 ~ P315,000 = Ps, 177,500/7 CCamying value, December 31, 2014 D Cost of Franchise (P285,000 - P135,000) ‘Amortization (P150,000/5 years), Carrying value, December 31, 2014 D_ Organization costs Goodwill PROBLEM 5 ~ TANYA CO. 21 22. 2. 25. © M3 (P50,000 ~ P5,000)/4 x 8/12 M2 (P84,000 - Pe, 000/5 1M (P62,000~ P6,000)/4 M4 (P75,600— P7,000)/5 x 11/12 “Total depreciation expense ~ machinery B Cost of vehicle traded in Less: Accumulated depreciation, Dec. 30, 2013: Balance, June 30, 2013 (P178,880 x 4) Depreciation, 7/1/13 ~ 12/30/13 (P320,000 ~ P178,880 = PIA1,120 x Ye x 30% x/ 6/12) ‘Canying value, Dec. 30, 2013 Fair value of vehicle traded in Gain on exchange, Dec. 30, 2013 A. Machinery Vehicles Vehicle traded in Remainder of begining balance (P320,000 — Pi 78,880 = PL41,120 x 34 x 30%) Building (P581,200 ~ P34,000 = 547,200/20) Land improvernents (P36,000/15) bctures (P32,000— P5,000 = P27,000/5 x 6/12) ‘Total depreciation expense, year ended June 30, 2014 A Cost of machine no. 3 Less: Accumulated depreciation, Sep, 20, 2014 (P2,000 ~ P6,000 = 56,000/4 x 38/12) Carrying value Trade in aiowance Gain on trade in A Machinery: M2 (P84,000 ~ P8,000 = P76,000/5 x 6/12) M3 (62,000 ~ PE,000 = P56,000/4 x 3/12) Ma 06/30/14 — 02/08/15 (P75,600 - P7,000 = P68, 600/5 x 7/12) Pe,003 + 02/08/15 ~ 6/30/15; Cost 75,600 Accum, Depr. (P68,600/5 x 18/12) 20,580 Carrying value, 02/08/15 55,020 ‘Add: cost of major overftaul 446,000 Total 71,020 Revised residual value (10,000) Revised depreciable cost 1,020 Divide by revised life 2 years a Revised annual depreciation 30.510 (30,510 x 5/12) wm MS (P88,000 ~ P10,000 = P78,000/6 x 9/12) Vehicles Cost (P320,000 x 34) ‘Accum. Depr., 6/30/14 (P178,880 ~ P50,012 + P37,044) Canying value, 6/30/14 Multiply by depreciation rate Building (P561,200 ~ P34,000 = P547,200/20 Land improvements (P36,000/15) Fixtures (P32,000 — P5,000 = P27,000/5) “Total depreciation expense, 6/30/15 44,720 P 5,202 P 7,600 20,715 9,750 240,000 74,088 3025 80,000 50,012 29,968 49,27 27,360 62,000 17,667- 41,565 22,226 27,360 2,400(CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) ~ MANILA ‘AUDITING PROBLEMS FINAL PREBOARD EXAMINATION PROBLEM 6 - SOMALIA Co. Corrected book balances P20,200 192,000 P91,800, 20,400 Agjusted bank balances 13200 176,900 302,700 87,400 ‘Shortage as of November 30 P7000 Unaccounted receipts ‘P.15,100 Unsupported/unrecorded disbursements 10.900 ‘Shortage as of December 31 ‘B_33,000 268 27.0 28. B 29.6 30. € PROBLEM 7 — PATAGO STORAGE ADJUSTING/CORRECTING ENTRIES ‘A. Equipment 27,000 Accumulated depreciation ([27,000/5]x2 years) 10,800 Retained earings (F27,000 ~ [P5,400 x 2 years]) 16,200 Depreciation expense (P27,000/5) 5,400 ‘Accumulated depreciation 5400 8B, Storage boxes 153,000, Office supplies 153,000 Inventory 336,000 Retained earnings 336,000 1D. Retained eamings ([PL0 x 12,000 shares] ~ P12,000) 108,000 Share premium 108,000 E, Retained earnings 360,000 ‘Interest expense 360,000 Interest expense (4/6 x P540,000) 360,000 Interest payable 360,000 F. Prepaid insurance (P648,000/3 x 2 years) 432,000 Retained earnings (648,000 ~ [P648,000/3]), 432,000 Insurance expense (P648,000/3) 216,000 Prepaid insurance: 216,000 3B 32 8B ac mc 35. D PROBLEM 8 ~ HERCULES COMPANY/ LUCERO COMPANY/SILAKBO COMPANY 36. B Note payable ~ bank 2,100,000, Note payable ~ shareholder 6,000,000 Discount on note payable (P678,000 x 1) 339,000) 5,661,000 ‘Accrued interest payable (Pé,300,000 x 12% x 9/12) — 567,000 Total current liabilities P8.328,000 37. Note payable ~ bank: % 1/1.— 4/1 (P8,400,000 x 12% x 3/12) 252,000 ‘ 4/4 — 12/31 (P6,300,000 x 12% x 9/12) “567.000 P819,000 } Note payable ~ shareholder: ‘Amortization of discount (P678,000 x V2) 339,000 Total interest expense Pi.158.000 38, A 1/1/14 10/31/14 (P1,500,000x 12% x 10/12) 150,000 2fi/i4— 7/31/14 (PS, 500,000 x 12% x 6/12) 270,000 5/1/14 - 12/34/14 (P2,400,000 x 12% x 8/12) 192,000 “Total interest expense in 2044 _ 612,000 Per cent 450.000 Understatement P162,000 39. A Proceeds - 1,100,000 Present value of face value (1,000,000 x 0.77) 770,000 Present value of interest (P1,000,000 x 6% = P60,000 x 2.53) 151,800 21,8 Share premium — conversion privilege P1720 40. A Canying value, January 1, 2014 921,800 Discount amortization in 2084: Effective interest (P921,800 x 9%) 82,962 Nominal interest (P1,000,000 x 6%) 60,000 22,962 ‘Canying value, December 31, 2014 344,762 ‘Share premium ~ conversion privilege 178,200‘CPA REVIEW SCHOOL OF THE PHILIPPINES (CAR) ~ MANILA AUDITING PROBLEMS Total consideration at vakie of shares issued (P20 x 25,000) Share premium ~ issuance PROBLEM 9 - SALUYOT COMPANY Net Debit Adjusted | Required Age Balance Adjustments Balance Rate | Allowance 041 month 372,960 8,000 380,960 1% P 3,810 1-3 months 307,280 2,000 309,280 2% 6,386 3-6 months 88,720 — 88,720 3% 2,662 | Over 6 months 24,000 (4,000) 8,000 50% 4,000 | 12,000 20% =| 2.400 | 27381960 (219.058 4B 28 43. A Accounts recetvabie P796,960, ‘Allowance for bad debts (19,058) Net realizable value bzze.se2 44, A Bad debt expense per books (P23,640 ~ P1,296) 722,344 | Collection of account written off 1,296 Decrease in allowance 110.296) Bad debt expense, as adjusted Bis2e4 45. ' PROBLEM 10 : ‘Compensation Cumulative Expense Compensation Year Calculation for Period Expense 1 PAS x 430 x 200 x Ye 645,000, + P645,000 2 PA5 x 405 x 200 2/3, 165,000 {810,000 3 PIS x 407 x 200 411,000 1,221,000 468 47.6 4B A 8.6 50, B PROBLEM 11~ INDAY CO, i 51, A Loss on sale oF building (P910,000 — P370,000) ~ P530,000 10.009 52. B Loss on Decine in Value of Inventories 53. C Share Capital, December 31, 2014 .2300,000 54, C Share Premium pede 55. D- Corrected net income (P60,000 ~ P10,000 ~ P2,000 — P30,000) 18,000 PROBLEM 12— MONTE COMPANY 56. C Preference share capital (3,000 + 600 = 3,600 x P200) 7720.00 57. B_ Ordinary share capital (10,000 + 13,500 + 27,000 + 11,000 = 61,500 x P10) 615,000 ‘SB. B 1/2/13 (P6x 10,000) 60,000 A (P16 x 3,000) 48,000 ) 3/2/13 (P12 x 10,800) + (P15 x2,700) 170,100 ‘7/40/13 (P16 x 600) + P400 10,000 6/17/14 (P230,000 ~ P190,000) 40,000 7/3M/14 (P19 PAB = PL x 2,000) (2,000) 9/30/14 (P11 x 11,000) 121,000 Total share premium 447.400 59, © Net income — 2013 . 450,000 Dividends ~ 2013 (247,750) Net income ~ 2014 425,000 Dividends ~ 2014 (424,200) Retained earnings, 12/31/14 ~ 126506,050 60. A Preference share capital 720,000 Ordinary share capital 615,000 Share premium 447,100 Retained earings 606,050 Total sharetolders’ equity 2.388.150 oot END =