Audit of investment account balances

1. The following were made available to you as part of your audit of ABC Corp.'s
investment accounts as of and for the period ended December 31, 2012:

Required:
Assuming that all the investments are accounted for at fair market value through profit or
losses under PFRS 9, what is the unrealized holding gain/loss to be reported in the 2013
statement of comprehensive income?

280,000.
2. The following were made available to you as part of your audit of ABC Corp.'s
investment accounts as of and for the period ended December 31, 2012:
 Required:
Assuming that all the investments are accounted for as available-for-sale securities
under PAS 39, what is the unrealized holding gain/loss o be reported in the stockholders'
equity portion of the 2012 statement of financial position?

508,147.
3. The following were made available to you as part of your audit of ABC Corp.'s
investment accounts as of and for the period ended December 31, 2012:
 Required:
Assuming that all the investments are accounted for at fair market value through profit or
losses under PAS 39, what is the realized gain/loss on sale of investments in 2012?
60,000.
4.
The investing cycle
1. Which of the following controls would a company most likely use to safeguard
marketable securities when an independent trust agent is not employed?

Two company officials have joint control of marketable securities, which are kept in a
bank safe-deposit box.
2. A weakness in internal control over recording retirements of equipment may cause an
auditor to

Select certain items of equipment from the accounting records and locate them in the
plant.
3. Which of the following controls would be most effective in assuring that the proper
custody of assets in the investing cycle is maintained?

The recorded balances in the investment subsidiary ledger are periodically compared
with the contents of the safe-deposit box by independent personnel.
4. Which of the following is not a control that is designed to protect investment securities?
Custody over securities should be limited to individuals who have recordkeeping
responsibility over the securities.
5.
Audit of equity accounts
1. The equity section of Urbiztondo Corporation's statement of financial position as of
December 31, 2011 is as follows:

Based on the above and the result of your audit, answer the following:
The balance of retained earnings as of December 31, 2012 is

P2,001,600
2. The equity section of Urbiztondo Corporation's statement of financial position as of
December 31, 2011 is as follows:
 Based on the above and the result of your audit, answer the following:
The balance of share premium as of December 31, 2012 is
P2,075,000
3. The equity section of Urbiztondo Corporation's statement of financial position as of
December 31, 2011 is as follows:
 Questions:
Based on the above and the result of your audit, answer the following:
The number of shares issued and outstanding as of December 31, 2012 is

P1,386,000
4. The equity section of Urbiztondo Corporation's statement of financial position as of
December 31, 2011 is as follows:

Questions:
Based on the above and the result of your audit, answer the following:
The balance of share capital as of December 31, 2012 is
P3,465,000
5.
Audit of non- trade liability balances
1. Bowles Corporation is in the business of leasing new sophisticated computer systems.
As a lessor of computers, Bowles purchased a new system on December 31, 2011. The
system was delivered the same day (by prior arrangement) to General Investment
Company, a lessee. The corporation accountant revealed the following information
relating to the lease transaction:

Questions:
Based on the above and the result of your audit, answer the following: The annual lease
payment under the lease is

P95,950
2. Bowles Corporation is in the business of leasing new sophisticated computer systems.
As a lessor of computers, Bowles purchased a new system on December 31, 2011. The
system was delivered the same day (by prior arrangement) to General Investment
Company, a lessee. The corporation accountant revealed the following information
relating to the lease transaction:
 Questions:
Based on the above and the result of your audit, answer the following:
The amount to be reported under current liabilities as liability under finance lease as of
December 31, 2012 is

P48,611
3.
Audit of interest expense and finance cost balances
1. In performing an audit, which one of the following procedures would be considered a
"substantive" test"?
Comparing last year's interest expense with this year's interest expense.
2. During the course of an audit, an auditor observes that the recorded interest expense
seems excessive in relation to the balance in long-term debt. This observation could lead
the auditor to suspect that
Long-term debt is understated.
3.
The financing cycle
1. An auditor's program to examine long-term debt most likely would include steps that
require

Correlating interest expense recorded for the period with outstanding debt
2. Two months before the year end, the bookkeeper erroneously recorded the receipt of a
long- term bank loan by a debit to cash and a credit to sales. Which of the following is
the most effective procedure for detecting this type of error?

Analyze bank confirmation information

3.
Audit of inventory balances - manufacturing
1. Cherry Lou Factory started operations in 2012. Cherry Lou manufactures bath towels.
60% of the production are "class A" which sell for $500 per dozen and 40% are "class B"
which sell for $250 per dozen. During 2012, 6,000 dozens were produced at an average
cost of $360 per dozen. The inventory at the end of the year was as follows:

The management considers the relative sales value method as a more equitable basis of
cost distribution.
Required:
How much is the cost of sales for the year 2012?

$1,993,500
2. Cherry Lou Factory started operations in 2012. Cherry Lou manufactures bath towels.
60% of the production are "class A" which sell for $500 per dozen and 40% are "class B"
which sell for $250 per dozen. During 2012, 6,000 dozens were produced at an average
cost of $360 per dozen. The inventory at the end of the year was as follows:

The management considers the relative sales value method as a more equitable basis of
cost distribution.
Required:
How much is the value of inventory as of December 31,2012?

$166,500
3. Cherry Lou Factory started operations in 2012. Cherry Lou manufactures bath towels.
60% of the production are "class A" which sell for 500 per dozen and 40% are "class B"
which sell for $250 per dozen. During 2012, 6,000 dozens were produced at an average
cost of $360 per dozen. The inventory at the end of the year was as follows:

The management considers the relative sales value method as a more equitable basis of
cost distribution.
Required:
How much of the total cost should be allocated to "Class A"?

$1,620,000
4.
Audit of the cost of goods sold balance

1. For several years a client's physical inventory count has been lower than what was
shown on the books at the time of the count so that downward adjustments to the
inventory account were required. Contributing to the inventory problem could be
weaknesses in internal control that led to the failure to record some
Purchases returned to vendors.
2. When auditing merchandise inventory at year-end, the auditor performs a purchase
cut-off test to obtain evidence that:

All goods owned at year-end are included in the inventory balance.

3.
Production cycle
1. Which of these is implemented to maintain accurate inventory records?
Periodic counts are conducted to adjust the perpetual records
2. A most likely procedure in obtaining an understanding of a manufacturing entity's internal
control over inventory balances

Reviewing the entity's description of inventory policies and procedures

3. Which of the following is a question that the auditor would expect to find on the
production cycle section of an internal control questionnaire?

Are all releases by storekeepers of raw materials from storage based on approved
requisition documents?
4.