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You are auditing the financial statements of Verdun Company for the year ended December 31,
2021. The following information is related to your audit:
Cash and cash equivalents amount to P2,000,000 which includes the following:
Treasury bills purchased on May 1, 2021 matures in October 31, 2021 90,000
Total 2,000,000
● Verdun wrote a check for P25,000 dated December 1, 2021 but it was delivered to
the supplier on January 5, 2022.
● Verdun received a customer’s check which was dated May 1, 2021 amounting to
P30,000. The bank did not accept the check since it was more than 6-months from
the date of the check
The following are the sales and purchase transactions of Verdun towards the year-end
December 31, 2021. Verdun’s merchandise inventory at year-end before adjustments is
P1,500,000. Verdun prices its goods at 25% based on sales.
● Shipped merchandise to customer amounting to P100,000, credit terms n/30, FOB
shipping point on December 29, 2021. Verdun recorded the sale on January 5, 2022
and the merchandise was included in the year-end physical count.
The balance of accounts receivable before adjustment was P1,200,000. It is the company’s
policy to set up doubtful accounts of 2% of outstanding accounts receivable. Current liabilities
consist of the following before adjustment Accounts payable P3,000,000; Accrued expenses
P150,000; Current portion of long-term debt P180,000.
You are auditing the financial statements of Munich Company for the year ended December 31,
2021. The following information is related to your audit:
The following adjustments are discovered during the year-ended December 31, 2021:
· Check payable to the supplier amounting to P85,000 dated January 5, 2022 was delivered
on December 29, 2021.
· Check received from customers dated January 3, 2022, received on December 30, 2021
· Includes a cash fund amounting to P250,000 set aside to purchase new machinery
All sales are made on credit terms n/30. The following are related to sales for year-end. Usual
delivery time is 7 days.
All purchases of raw materials are made on credit terms n/45. The following are related to
purchases for year-end. Physical count was on December 31, 2021
A 300,000 280,000
B 200,000 250,000
C 250,000 240,000
Compute for:
2. Accounts receivable
3. Inventories
4. Current liabilities
5. Current ratio
PROBLEM 3
You are auditing the financial statements of Nuremburg Company for the year ended December
31, 2021. The following information is related to your audit:
Inventories 980,000
· Customer check amounting to P74,000 dated January 7, 2022 received on December 29,
2021
· Check payable to supplier amounting to P82,000 dated December 28, 2021, delivered on
January 4, 2022
The company’s policy is to establish 4% bad debts based on outstanding accounts receivable.
Transactions related to the sales and purchases during year-end are as follows:
· Sold goods to customers amounting to P59,000, costing P45,000. Terms, n/45, FOB
destination. The goods were shipped on December 29, 2021. The sale was recorded in
2021. The items were excluded from physical count at year-end.
· Purchased goods from vendors amounting to P69,000. Terms, n/60, FOB shipping point.
The goods were shipped on December 18, 2021, received on December 28, 2021. The
purchase transaction was recorded on January 4, 2022. The items were included in physical
count at year-end
· Utilities for December 2021 amounting to P13,000 payable on January 15, 2022
· Quarterly expanded withholding taxes amounting to P35,000 payable of January 31, 2022
Compute for:
3. Inventories
4. Current liabilities
5. Current ratio