AUDITING PROBLEMS IRENEO/ESPENILLA QUIZZER 5 - CASH AND CASH EQUIVALENTS, RECEIVABLES AND INVENTORIES. PROBLEM 1: Presented below is a list of items that may or may not be reparted as inventory in a company’s December 31, balance sheet Cost of goods aut on consignment at another company’s store 2,400,000 Goods sold on installment basis 300,000 Goods in transit purchased FOB shipping point 360,000 Goods in transit purchased FOB destination 600,000 Cost of goods sold to another company, for which the company has signed an agreement to repurchase at a set price that covers all costs related to the inventory 900,000 Cost of goods sold where large returns are predictable 840,000 Cost of goods in transit sold FOB shipping point 360,000, Freight charges on goods purchased 240,000 Factory labor costs incurred on goods still unsold 150,000 Interest cost incurred for inventories that are routinely manufactured 120,000 Costs incurred to advertise goods held for resale 60,000 Materials on hand not yet placed into producticn 1,050,000 Office supplies Raw materials on which the company has started production, but which are not completely processed 840,000 Factory supplies 60,00 Cost of goods heid on consignment from another company 1,350,000 Costs identified with units completed but not yet sold 780,000 Cost of goods in transit sold FOB destination 120,000 Temp. investment in stocks and bonds that will be resold in the near future 1,500,000 1. How much of these items y in the financial stat PROBLEM 2: The following accounts were extracted from the unadjusted trial balance of Silang Corp. as of December 31, 2014: Sash 963,200 ‘Accounts receivables 2,254,000 Merchandise inventory 6,050,000 ‘Accounts payable 4,201,000 Accrued expenses 60,400 During your audit, you discovered that the client held its cash records open even after year end. ‘Audit notes: . Collections for January 2015 of P654,600 were recorded in the December 2014 cash records. The receipts of P360,100 represents cash sales with the balance representing collections from customers who paid-within the 59% cash discount period. b. Accounts payable of P372,400 was paid in January 2015. The payments on which a P12,400 cash discount has been taken were included in the December 31, 2014 check register. Merchandise inventory as stated in the trial balance represented the result of the count conducted on December 30, 2014 on inventories on hand. The following information were found to be relevant in your audit of inventories: + Goods valued at P275,000 are on consignment with a customer and were not included in the physical count + Goods costing P217,500 were received from a vendor on January 4, 2015. The related invoice was received and recorded on January 6, 2015. These goods were shipped by the vendor on December 34, 2014 under an FOB shipping point terms.Reoa: Ime Renew Scneo! or AcCOUNLAMCY rage or 20 + Goods costing P637,500 were shipped on December 31, 2014, and were received by the customer on January 2, 2015. The terms of the invoice were FOB shipping point. The sales of P815,000 has been recorded in 2014. + A shipment of goods invoiced at P182,000 to a customer on December 29, terms FOB destination was recorded in 2015. The cast of the related goods amounted to P130,000 and were received by the customer on January 4, 2015. + The invoice for goods costing P175,000 was received and recorded as purchase on December 31, 2014. The related goods, shipped FOB Destination were received on January 4, 2015. + Goods valued at P612,800 are on consignment from a vendor. These goods were excluded from the physical count. Requirements: Based on the result of your audit ascertain the following: 2. Adjusted balance of Cash: a, 963,200 . 681,000 b. 693,400 d. 668,600 3. Adjusted balance of Accounts receivable: a. 2,254,000 . 2,564,000 b. 2,548,500 4. 2,908,600 4. Correct Inventory ending balance: a, 5,010,000 ©. 6,035,000 b. 5,860,000 4. 6,080,000 5. Net adjustment to cost of sales: a. debit by P57,500 . credit by P580,000 b. debit by 232,500 4. credit by PSS, 300 6. Adjusted accounts payable: a. 4,243,500 G 4,615,900 b. 4,398,400 4. 4,790,900 7. Correct warking capital ratio: a, 2.20 ©. 1.85 b. 198 d. 1.80 PROBLEM 3; In your audit of the December 31, 2014 financial statements of Ivy Inc., you found the following inventory related transactions: a, Goods casting P100,000 are on consignment with a customer. These goods were invoiced at normal profit margin which was at 40% based on cost and was recorded as 2014 sales. Being offsite an the count date which was on December 30, 2013, the goods were not included in the physical count. b. Goods costing P33,000 were delivered to Ivy Inc. on January 4, 2015. The invoice of these goods were received and recorded on January 10, 2015. The invoice showed the shipment was made on December 29, 2014, FOB shipping point. . Goods costing P40,000 were shipped FOB shipping point on December 31, 2014, and were received by the customer on January 2, 2015. Although sale was recorded in 2014, these goods were included in the 2014 inventory. 4. Goods costing P16,000 were shipped to a customer on December 30, 2014, FOB destination. These goods were received by the customer on January 5, 2015 and were not included in the physical count. The sale was properly recorded in 2015. €. Goads costing P22,000 shipped by a vendor under FOB destination term, were received on January 3, 2015. The related invoice however, were received on December 31, 2014, thus was recorded as purchase in 2014. f. Goods costing P50,000 were received from a vendor under consignment term. These goods were included in the physical count. No purchase related to the inventory had been recorded vet. Ivy Inc., recorded as 2014 sale a P112,000 invoice for goods delivered to a customer on December 31, 2014, FOB Destination. The goods were received by the customer on Januaryy ReSA: The Review School of Accountancy Page 3 of 26 5, 2015. Having been delivered after the count date, the goods were included in the physical count Requirements: ‘8. What is the net adjustment to inventories as of December 31, 20147 ‘a, 59,000 &. 90,000 b. 43,000 d. 66,000 ‘9. Assuming all sales are on account, what is the net adjustment to accounts receivable as of December 31, 2014? a. 260,000) <. 140,000 b. 252,000 4. 212,000 10, Assuming all purchases are on account, what is the net adjustment to accounts payable? a. 22,000 ©. 11,000) b. 33,000 d. 55,000 11, Whats the effect of the errors to the 2014 net income? a, 194,000 ©. 164,000 b. 220,000 d. 204,000 PROBLEM 4: Bird Company is a manufacturer of small tools. ‘The following information was obtained from the company’s accounting records for the year ended December 31, 2014. Inventory at December 31, 2014 (based on physical count in Bird's warehouse at cost on December 31, 2014) Accounts payable at December 31, 2014 Net sales (sales less sales retu Your audit reveais the following inform ‘a. The physical count included tools to be shipped to a customer FOB shipping point on December 31, 2014. These tools cost P64,000 and were billed at P78,500 and were recorded as December sales. They were physically segregated awaiting shipping instructions from the customer. b. Goods shipped FOB shipping point by a vendor were in transit on December 31, 2014, These 93,000 were received in January 2015 and were reearded as 5 Work in process inventory costing P27,000 was sent to a jab contractor for further processing d. Not included in the physical count were goods returned by customers on December 31, 2014. ‘These goods costing P49,000 were inspected and returned to inventory on January 7, 2015, Credit memos for P67,800 were issued to the customers at that date. e. In transit to a customer on December 31, 2014, were goods costing P17,000 shipped FOB destination on December 26, 2014. A sales invoice for P29,400 was issued on January 3, 2015, when Bird Company was notified by a customer that the tools had been received. f. At exactly 5:00 pm on December 31, 2014, goods costing P31,200 were received from a vendor. These were recorded on @ receiving report dated January 2, 2015. The related invoice was recorded on December 31, 2014, but the goods were not included in the physical count. 4g. Included in the physical count were goods received from a vendor on December 27, 2014. However, the related invoice for P36,000 was not recorded because the accounting department's copy of the receiving report was lost. h. A monthly freight bill for P16,000 was received on January 3, 2015. It specifically related to merchandise bought in December 32, 2014, one-half of which was still in the inventory at December 31, 2014, The freiaht was not included in either the inventory or in accounts payable at December 31, 2014, Based on the preceding information, compute the December 31, 2014, adjusted balance of the following: A B ca . 12. Inventory 2,095,200 2,031,200 2,046,200 2,078,200 13. Accounts payable 1,552,000 1,560,000 1,467,000 1,591,200 14, Net sales 9,614,900 9,576,500 9,625,600 9,547,100ReSA: The Review School of Accountancy Page 4 of 26 PROBLEM 5: You are making an audit of the Malaguku Co. for the year ended December 31, 2014. You have ‘observed the taking of physical inventory and have noted that all merchandise actually received up to the close of business, December 28, 2014, were included on the inventory sheets. The total of the physical inventory, at invoice cost, is P175,000, while the purchase account shows a balance of 1,750,000 as of December 31, 2014. You noted also the following purchases invoices have been recorded in the voucher register as follows: DECEMBER RR 2014, VOUCHER INVOICE DATE TERMS MERCHANDISE No. REGISTER RECEIVED 631 P 2,000 December 26 Shipping point December 29, 632 4,000 December 26 Destination January 5 633, 9,000 January 2 Destination December 30 634 8,000 December 31 Shipping point January 4 635 1,000 January 7 Shipping point December 28 636 6,000 January 3 Shipping point January 6 JANUARY RR. 2015 VOUCEHR —_—INVOICE DATE TERMS MERCHANDISE No REGISTER RECEIVED 637 P8500 December 20 Destination January 8 638 7,200 January 2 Shipping point December 27 639 11,700 December 28 Destination January 7 640 6,900 December 30 Destination January 6 641 4/100 January 2 Destination December 25 Requirements: 15, What is the adjusted balance of Purchases for the periad ended December 31, 20147 a. 1,781,300 1,753,200 16. Whet is the adjusted balance of the Inventory account as of December 31, 20147 a. 175,000 c. 194,000 b. 186,000 d. 198,100 PROBLEM 6: You are engaged in the audit of the inventory of the Kula Inc. as of December 31, 2014. The company is on physical inventory basis. The physical inventory was actually taken on December 29, 2014 rather than the evening of December 31, so that the company employees might enjoy the New Year's festivities. You have observed the taking of the physical inventory. AS taken, the physical inventory inclucled only merchandise received through December 29. The subsequent compilation of the inventory includes only the merchandise physically counted and is not yet recorded on the books. After having completed appropriate work on the inventory as compiled, you make additional tests to determine a. The correct cut off the purchases account for the year 2014. (it is the company policy to recognize purchases based on freight terms and the passage of title), The ledger balance is 650,000. b. The correct amount of the inventory to be stated on a comparable basis with acquisition costs (purchases) and sales. The inventory summary shows a total of P27,000. Usted in the table below are certain matters developed in the course of your tests. Certain voucher register entries are as follows: Dates Mdse. F.0.8.Terms Shipped _—_—Received Invoice No. Amount December, 2014 Destination 12-23-14 12-26-14 1401 250 Shipping point 12-24-14 12-30-14 9176 310 Shipping point 12-24-14 12-31-14 0010 180 Destination 12-24-14 12-29-14 1307 550 Shipping point 12-26-14 1-2-15 6609 690 Destination 12-26-14 12-31-14 6610 420 Destination 12-26-14 1-3-15 0481 750 Shipping point 42-27-14 12-30-14 3671 290Shipping point 1-215 14-15 6098 350, January, 2015 Destination 12-26-14 1-2-15 Jour 680 Shipping point 12-27-14 12-30-14 ©7711 460 Destination 12-27-14 12-29-14 9001 770 Destination 12-28-14 1-2-15 8345 205 Shipping point 12-28-14 1-315 4678 315 Shipping point 42-29-14 12-31-14 9981 595 Destination 12-29-14 12-31-14 ©7263 610 Destination 12-31-14 194-15 4915 375 Shipping point 1-2-415 1-5-15 5666 805 The physical inventory compilation includes P750 of merchandise received on consignment from a supplier: The company has other consigned stocks on hand which were not included in the physical inventory compilation and which cost PS,200 if purchased Shipments of December 31, 2014 were properly recorded on the books as sales. You computed the cost of these sales as being P 1,900. Requirements: Adjusted balances at December 31, 2014 of: 17. Inventory a. 30,120 cc. 27,300 b. 28,220 d. 26,430 18. Purchases: 2. 649.675 b. 649,990 PROBLEM 7: Flores Company cans two food commodities which it stores at various warehouses. The company uses a perpetual inventory system under which the finished goods inventory is charged with production and credited for sales at standard cost. The detail of the finished goods inventory is maintained on punched cards by the tabulating department im units and pesos for the various warehouses e accounting department receives copies of datly production reports and sales invoices. Units are then extended at standard cost and @ summary of the day’s activity is posted to the Finished Goods Inventory general ledger control account. Next the sales invoices and production reports are sent to the tabulating department for processing. Every month the control account and detailed tab records are reconciled and adjustments recorded The last reconciliation and adjustments were made at November 30, 2024. Your CPA firm observed the taking of the physical inventory at all locations in December 31, 2014. The inventory count began at 4:00 p.m. and was completed at 8:00 p.m. The company's figure for the physical inventory is P342,400. The general leciger control account balance at December 31 was P384,900, and the final “tab run” of the inventory punched cards showed a total of P403,3300. Unit cost data for the campany’s two products are as follows: Product Standard Cost A P2 B 3 ‘A review of December transactions disclosed the following: 1, Sales invoice no. 1310, December 2, was priced at standard cost for P11, 700 but was listed on the accounting department's daily summary at P11,200. 2. A production report for P23,900, December 15, was processed twice in error by the tabulating department. 3. Sales invoice no. 1423, December 9, for 1,200 units of product A, was priced at a standard cost of P1.50 per unit by the accounting department. The tabulating department corrected the error but did not notify the accounting department of the error. 4. A shipment of 3,400 units of Product A was invoiced by the billing department as 3,000 units on sales invoice no. 1504, December 27. the error was discovered by your review of transactions, anar >ReSA: The Review School of Accountancy Page 6 of 26 5. On December 27 the Pampanga warehouse notified the tabulating department to remove 2,200 Unsalable units of Product A from the finished goods inventory, which it did without receiving a special invoice from the accounting department. The accounting department received a copy of the Pampanga warehouse notification on December 29 and prepared a special invoice which was processed in the normal manner. The units were not included in the physical inventory. 6. A report for the production on January 3 of P2,500 units of Product 8 was processed for the Bulacan plant as of December 31 7. A shipment of 300 units of Product B was made from Tarlac warehouse to Ken’s Markets, Inc., at 8:30 p.m. on December 31 as an emergency service. The sales invoice was processed as of December 31. Flores Company prefers to treat the transaction as a sale in 2014. 8. The working papers of the auditor observing the physical count at the Bataan warehouse revealed that 700 units of Product B were omitted from Flores’s physical count. Flores concurred that the units were omitted in error. 9. A sales invoice for 600 units of Product A shipped from the Zambales warehouse was mislaid and was not processed until January 5. The units were shipped on December 30. 10, The physical inventory of the Angeles warehouse excluded 350 units of Product A marked reserved”. Investigation revealed that this merchandise was being stored as a convenience for Steve's Markets, Inc., a customer. This merchandise, which has not been recorded asa sale, is billed as it is shipped. 11. A shipment of 10,000 units of Product B was made on December 27 from the Zambales, warehouse to the Bataan warehouse. The shipment atrived on January 6 but.had been excluded from the physical inventories. Requirements: 19. What is the correct inventory balance to be presented in the balance sheet as of December 31, 20147 a. 344,300 c. 383,000 b..373,500 3. 374,300 20. What is the inventory shortage/overage? a. 7,500 over c. 1,500 over b. 7,500 shortage 4.0 PROBLEM 8: On May 31, 2014, a fire completely destroyed the work-in process inventory of Alder Paints. Physical inventory figures were published as fallows: As of January 1, 2014 As of May 31, 2014 Raw Materials P 15,000 P 30,000 Work-in Process 50,000 Finished Goods 70,000 60,000 Sales for the first five months of 2014 were P150,000. Raw materials purchased were P50,000. Freight on purchases was P5,000. Direct labor for the five months was P40,000, To determine the value of the lost inventory, the insurance adjusters have agreed to use an average gross profit rate of 32.5%. Assume that manufacturing overhead was 45% of direct labor cost. Requirements: 21. The value of the goods manufactured and completed as of May 31, 2014 was a. P60,000 c. P95,000 b, P90,000 d. 91,250, 22. Raw materials used during the first Five months of 2014 were a. P25,000 c. P40,000 b. P35,000 d. 45,000 23. The total value of goods put in process during the five-month period amounted to a. P143,000 c. P168,000 b, P150,000 d. 148,000 24. The value of the destroyed work-in process inventory as determined by the insurance adjusters would be a. P56,750 & P86,750 b. P65,750 d. P57,650RgSA: The Review School of Accountancy Page 7 of 26 PROBLEM 9: (On May 21, 2014, a fire destroyed the entire merchandise inventory on hand of Natural Corporation ‘The following information is available: Sales, January 1 through May 2, 2014 380,000 Sales return (covering the same period) 20,000 Sales allowance (covering the same period) 10,000 Sales discounts (covering the same period) 25,000 Inventory, January 1, 2014 80,000 Purchases, January 1 through May 2, 2014 (including P40,000 of {goods in transit on May 2, 2014 shipped FOB shipping point) 400,000 Purchase discounts 40,000 Purchase returns and allowances 30,000 Mark-up percentage on cost 20% 25. What Is the estimated inventory on May 2, 2014 immediately prior to the fire? a. 70,000. €. 110,000. . 82,000. d, 122,000. 26. How much should be recognized as inventory loss? ‘a. 30,000. . 70,000. b. 42,000. d, £2,000. PROBLEM 10: You were assigned to test the reasonableness of the inventory account balance as reported by your Cent, Surety Corp. The following information is made available by Surety Corp.'s account Reta Beginning inventory 1 500,000 Purchases 3,048,400 00,000 Freight in 80,000 Purchase returns 140,000 180,000 Mark-ups. 600,000 Mark-up cancellations 100,000, Mark-downs 1,300,000 Mark-cown cancellations 385,000, Sales 4,470,000 Sales returns 150,000 Sales discount 200,000 Employee discount 400,000 Ending inventory as a result of the physical count conducted on December 31, was at P649,600. What is the amount of estimated inventory shortage, if any, as a result of your test of reasonableness uncer the following assumed cost formula? (round-off cost percentage to 2 whole numbers) 27. Lower of cost or average/Conservative/Conventional Approach a. none b. 176,050 c. 327,700 4. 479,350 28. Average Approach a. none b. 176,050 . 294,000 4. 327,700 29. FIFO Retail Approach a. 176,050 b. 294,000 . 378,250 d. 479,350 PROBLEM 11: You were assigned to audit the inventories of Titanuim Corp. in relation to your audit firm’s audit of the company's financial statements as of and for the period ended December 31, 2014; Since internal ‘control over inventories were good, you audit manager simply asked you to render analytical procedure to test the reasonableness of the inventory balance. The following information were made ‘available by Titanuim Corp.'s accountant: Cost Retail Beginning inventory. 1,020,000 _ 1,920,000 Purchases 13,072,500 22,155,000 Freight in 300,000 Purchase return 450,000 750,000 Purchase allowance 270,000ReSA: The Review School of Accountancy "yehsapel. 5) 3% 05 pled O82) jy Ref. TIF Cy procedures? (round 30. Lower of cost or average/Conservative/Conventional Approach: Departmental transfer debit (1h) Departmental transfer credit Net markup Net markdown Sales Sales returns and allowance Sales discounts Employee discount Normal Spoilage and breakages Abnormal Sposlages and breakages ) 2 HY #8 300,000 600,000 120,000 off cost% to nearest whole number, eg: xx%) 425,000 3,200,000 450,000 1,425,000 19,800,000 ‘450,000 500,000 300,000 600,000 200,000 3. 297,500 b. 252,500 c. 308,750 d, 320,000 | 31. Average Approach: 2. 297,500 b. 252,500 ©. 308,750 4. 320,000 \— 32. FIFO Retail Approach: a. 297,500 b. 252,500 c. 308,750 . 320,000 PROBLEM 12: Nancy Inc. had the following items of merchandise inventories with related information about estimated setling price and cost to sell as of December 31, 2014: Quantity [Unit Gost Unit Selling Price | Unit Cost to Sell 10,000 P20 P30 15,000 25. - 30 | _| 20,000 _30 40 25,000 32 —as | 30,000 35. 50 ‘Quantity [Unit Cost Unit Cost to Sell P22 P2 28 5 25 10 30, 10 AS Ss Required 33. What is the correct carrying value of inventories if the lower af cost or NRV valuation is ‘employed on an it a. 5,515,000 m per item basis? b. 5,831,000. 5,981,000 4. 6,100,000 Bis 24m t ’ “ TS The company reported inventories at P400,000 as a result of ts physical count on Decemter 31, 2014, what is the amount of estimated ending inventory shortage/overage as a result of your audit 34. What is the loss on inventory write-down, assuming that direct write-off method is used under requirement 1 3. none 35. What is the correct carrying value of inventories if the lower of cost or NRV valuation is b. 119,000 . 150,000 employed on a per class basis? 2. 5,515,000 b. 5,831,000 —_«, 5,981,000 4. 466,000 d. 6,100,000 36. What Is the loss on ifventory write-down, assuming that direct write-off method is used under requirement 3: a. none PROBLEM 13: b. 119,000 cc. 150,000 d. 466,000 The Savior Corporation uses the lower of cost or net realizable value inventory. Data regarding the items in work-in-process inventary are presented below: Historical cost Markers Pens P24,000 P18,880 Pencils 30,000,Selling price 36,000 21,800 38,000 Estimated cost to complete 3,000 2,620 6,200 Replacement cost 20,800 16,800 16,800 Normal profit margin as a % of selling 20% 20%: 20% price Cast to sell based on selling pi 5% 10% 10% Required: 37. What is the loss on write-down under the direct write-off method? a. none b. 3,880 €. 3,320 d. 5,620 38. What is the loss on write-down under the allowance method, assuming that the unadjusted balance of the allowance for inventory write-down is at P2,000? a. none b. 1,880 ©. 1,320 4. 3,620 39. What is the gain on recovery of previous write-down under the allowance method, assuming that the unadjusted balance of the allowance for inventory write-down is at P5,000? a. none b. 1,120 ©. 3,680 d. 1,380 40. What is the correct carrying value of inventories as of December 31? a. 72,880 b. 76,200 ©, 69,000, 4. 67,200 PROBLEM 14: October Inc., a manufacturing company, had the following information about its inventories as of December 31, 2014 Fintehed SGoods Inventong ——__ iri Sts [item | Cost Selling Cost to Sell Pace 500,000 | P1,000,000 | 20% of Saies Price 4,200,000 | 30% of Sales Price 10% of Sales Price | [ Overhead | Costto | —50,000 | P25;000 $5,000} 40,000 25,000 | 80,000 Raw Materials Inventory: Finished Goods A: Item Cost | Replacement cost RM A-O1 | P120,000 | “Pi25,000 RM A-02 95,000 90,000 | Raw Materials Inventory: Finished Goods B: tem Cost [Replacement cost__ | [RM B-01_| P80,000 | P100,000 [Rm 6-02 | 105,000 98,000 RM B-03 | 110,000 100,000 Raw Materials Inventory: Finished Goods C: tem Cost Replacement x cost _| RM C-01 | Pi75,000 | _P170,000 RM C-02 | 40,000 | 45,000 | Required: 41. What is the correct carrying value of finished goods inventory? a.2,500,000 b. 2,350,000. 2,930,000 —d. 3,000,000 42. What is the correct carrying value of work-in process inventories? a. 435,000 b. 396,000 ¢. 401,000 . 445,000 ADNEReSA: The Review School of Accountancy Page 10 of 26 43, What is the correct carrying value of raw-materials inventaries? , 725,000 b. 708,000 ¢. 728,000 d, 698,000 44. Assuming direct write-off method is used to account for inventory write-down, how much ‘should be recognized in the profit/loss as a result of the lower of cost or net realizable value valuation of inventories? a. 201,000 b. 206,000 €. 210,000 4d. 216,000 45. Assuming allowance method and the following allowance for inventory write-dawn existed at ‘the beginning of the year (FG ~ P60,000; WIP ~ P70,000; RM - 0}, how much should be recognized in the profit/loss as a result of the lower of cost or net realizable value valuation of inventories? a. 107,000 b. 86,000 c. 138,000 d. 145,000 PROBLEM 1! ‘You observed the inventory count of the Solsons Company as of December 31, 2014. The client prepared the summary presented below and gave it to you for verification. Quantity Cost NNRV Amount A 360 units P3.60/dozen 3.64/dozen P1,310.40 8 24 units, 4.70 each 4.80 each 112.80 c 28 units 16.50 each 16.50 each 1,353.00 D 43 units 5.15 each 5.20 each 176.80 E 400 units 9.10 each 8.10 each 3,640.00 F 79 dozens. 2.00 each 2,00 each 140.00 G 95 grosses 144.00 per gross 132.00 per gross. 13,780.00 46. How much should the inventory be presented in the 2014 balance sheet? 3. 18,364.25, ¢. 20,513.20. b. 19,604.25. d. 20,315.00, PROBLEM 16: the course of your audit of DKNY Company's "Receivables" account as of December 31, 2014, you found out that the account comprised the following items: Trade accounts receivable P1,550,000 Trade accounts receivable, assigned (proceeds from assignment amounted to P650,000) 750,000 Trade accounts receivable, factored (proceeds from factoring done on a without-recourse basis amounted to P250,000 300,000 12% Trade notes receivable 200,000 20% Trade notes receivable, discounted at 40% upon receipt of the 180-day note on a without recourse basis : 300,000 Trade receivables rendered worthless 50,000 Instatiments receivable, normally due 1 year to two years 600,000 Customers’ accounts reporting credit balances arising from sales returns 60,000 Advance payments for purchase of merchandise 300,000 Customers” accounts reporting credit balances arising from advance payments 40,000 Cash advances to subsidiary 800,000 Ciaim from insurance company 30,000 Subscription receivable due in 60 days, 600,000 ‘Accrued interest receivable 20,000 Deposit on contract bids 500,000 Advances to stockholders (collectible in 2017) 2,000,000 Requirements: 47. How much is the total trade receivables? a. 3,650,000 ©, 3,000,000 b. 3,100,000 4. 2,950,000 48. How much is the amount to be presented as “trade and other receivables” under current assets? a. 7,350,000 . 4,850,000 b, 5,350,000 4. 4,050,000 49. How much loss from receivable financing should be recognized in the income statements? 2. 36,000 . 86,000,Reon ree newer sureur or uN reye 1120 b. 50,000 4. 195,000 PROBLEM 1 In relation to your audit of Inuyasha Inc.’s accounts receivable you ascertained the following information The general ledger balances of the client’s receivable and related accounts were: Accounts receivables 3,225,300 Allowance for bad debts. (169,000) ‘Amortized cost 3,056,300 b. Inuyasha Inc. estimates its bad debt losses by aging its accounts receivable, the aging schedule of accounts receivable at December 31, 2014, is presented below: ‘Age of accounts Amount Current 1,686,400 1 to 20 days past due 922,000 31 to 60 days past due 384,800 61 to 90 days past due 153,300 Over 90 days past due 78,800 The company normally sells n/30. d. Furthermore, the company’s uncollectible accounts experience for the past 5 years are summarized in the schedule that follows: Year Current. = 1 - 30 3h-60 © 1-90 More than daysPD days PD daysPD © 90. cays PO 2013 6% 23% 2012 85 18% 2011 4 16% 2010 5% 22% 2009 2% 21% Requirements: 50. What are the corresponding percentages to be used per age category in computing for the client's require allowance for bad debts? 2 20% 45% . 10% 25% 50% cc % 10% 20% = 50% d. 2% 10% 25% 45% 51. The required allowance for bad debt expense is: a. 173,653 c. 188,368 b. 185,415 J, 220,842 52. The net realizable value of the company’s accounts receivable on Becember 31, 2014, should be a. 3,036,932 . 2,986,345 b. 3,004,458 4. 2,976,540 ‘The Mexican Corp. grants its customers 30 days credit. The company uses the allowance method for its uncollectible accounts receivable, During the year, a monthly bad debt accrual is mace by multiplying 2% by the amount of credit sales for the month, At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2014 before any audit adjustments, the general ledger accounts showed balances of account receivable at P1,230,000 and the allowance for bad debt at P106,000. Accounts receivable activity For 2014 included the following: Credit sales 12,800,000 Write offs, 82,000 The company's controller prepared the following aging summary of year-end accounts receivable: Age Group Amount Percent Collectible 0 - 60 days 825,000 98% 61 ~ 90 days 220,000 90% 91 - 120 days 50,000 70%ReSA: The Review School of Accountancy Page 12 of 26 Qver 120 days 128,000 60% Total 1,223,000 It was ascertained that P40,000 from the over 120 days accounts are absolutely worthless. Requirements: 53. How much is the unreconciled difference between the general ledger and the subsidiary ledger balance of accounts receivable and how should it be accounted for: a. 7,000; GL prevailing over SL, with the difference being charged against sales. B. P10,000; GL prevailing over SL, with the difference being charged to bad debt expense. c. P7,000; SL prevailing over GL, with the difference being charged against sales. 4. P10,000; SL prevailing over GL, with the difference being charged to bad debt expense. 54. How much is the total bad debt expense for 2014? a. 304,700. ¢, 280,700. b. 278,700. 4. 294,700. 55. How much is the net realizable value of accounts receivable at December 31, 2014? a. 1,123,000. c. 1,094,300. b. 1/118,300, 4. 1,223,000. PROBLEM 1! You are auditing the Accounts Receivable of Rovers Inc. as of December 31, 2014, You found the following information in the general journal: Accounts receivable 1,466,720 Lessi_ Allowance for doubtful accounts (46,720) Accounts receivable net 1,420,000 The accounts receivable subsidiary ledger had the following details: Customer, Invoice date Amount Balance Gudang 9/12/2014 P139,200 P139,200 Tisoy r2fizf20i4——153,600 12/02/2014 99,200 252,800 uso 11/17/2014 185,120 10/08/2034. 176,000 361,120 Naning 12/08/2014 160,000 10/25/2014 44,800 8/20/2014 40,000 244,800 Nanong 9/27/2014 96,000 "96,000 Balong 8/20/2014 73,360 71,360 Peejong 12/06/2014 112,000 11/29/2014 168,440 _261,440_ Total Pi,446,720_ Additional information: a. You discovered based on your review of subsequent events that Balong recently went bankrupt, thus your suggested that the amount receivable from the same shall be written off. cs b. You also discovered that the invoice dated 12/02/2014 has already been settled by Tisoy Per OR number 34675. This amount however has been erroneously posted against Gusoy’s Subsidiary ledger as a settlement for an invoice dated 11/05/2014 for the same amount. c. The estimated bad debt rates below are based on the company’s receivable collection experience: Ae i; ‘Age of accounts % of Coltectibiity IVE 1. 0 ~ 30 days 98% NC 300) 425 31-60 days 95% iy ane ito 61 - 90 days 90% od Dabs 91 - 120 days 80% ont Over 120 days 50% Hcl Required 56, Assuming that there were no other entries to the allowance for doubtful accounts, what is the {D correct bad debt expense for the year? 2. 95,680 c 141,984 b. 92,704 d. 144,960 57. What is the correct allowance for bad debt expense for the year ended December 31, 20147 a. 156,000 120,320 b. 153,024 d. 117,34458. What is the net adjustment to the Accounts receivable in the general ledger? a. 172,560 93,360 b. 119,200 d. /1,360 59. What it the carrying value of the company’s accounts receivable as of December 31, 2014? a 1,255,040 c. 1,275,040 bd 1,258,016 d, 1,295,040 60. What is the necessary adjusting entry to adjust any unlocated difference between the SL and ou? . @. Bad debt expense 20,000 AE Presopne, ‘ ‘Accounts receivable 20,000 et Haake Jon Ls b. Sales 20,000 Accounts receivable 20,000 ©. Accounts receivabie 20,000 Other income 20,000 d. No necessary entry ‘You were assigned te audlt Natasha Inc.'s accounts receivable which had. an unadjusted balance per books of P7557142, net of an allowance for bad debts amounting to P32,858. Your inquiries and Investigations revealed the following inform, a. The only entries in the Bad debt expense account were: = Acredit for P1,296 on December 1, 2014, because a customer remitted in full, an account charged off on October 31. 2014 + Agebit on December 31, for the amount of the credit to Allowance for bad 4 same di b. The allowance for bad debt accounts had the following details: Jan. 1, balance 15,250 June, 30, write off of accounts (2,296) ‘Aug. 31, write off of accounts (3,280) Oct. 31, write off of accounts. (2,256) Dec. 31, Bad debt expense (3%*788,000) 23,640 Dec. 31) palanc 32/858 Records revealed that the December 31, 2014 bad debt expense was debited to the bad debt expense account and credited to allowance for bad debt for the amount shown above, while the write offs credited to accounts receivable amounted only to P6,032. Further investigation revealed that the correct amounts to be written off were shown in the analysis above. c. An’aging schedule of the accounts receivable as of December 31, 2014, and the decisions are as shown in the table below: Amount to which the allowance is to be adjusted after adjustments and corrections Age Net debit have been made bal 0 = 1 month 372,960 1% 1-3 months 307,280 2%. 3-6 months 88,720 3% Over 6 months 24,000. Definitely uncollectible, P4000; P8,000 is considered to be 50% uncollectible; the remainder is estimated to be 80% collectible. d. There is a credit balance in one accounts receivable (0 ~ 1 months) of P8,000; it represents an advance on a sales contract; also there is a credit balance in one of the 1 - 3 months accounts receivable of P2,000 for which merchandise will be accepted by the customer. fe. The accounts receivable control account is not in agreement with the subsidiary ledger. The differences cannot be located, and the company’s accountant decides to adjust the control to the sum of the subsidiaries after corrections are made. Requirements: 61. What is the correct bad debt expense for the year? a. 10,296 c. 13,343 b. 10,640 4. 14,640ReSA: The Review School of Accountancy Page 14 of 26 62. What is the adjusting journal entry to record the remaining unlocated difference between the ‘general ledger and the Subsidiary ledger after consideration of all adjustments? a. Accounts receivable 5,760 Bad debt expense 5,760 b. Accounts receivable P5,760 Sales 5,760 Accounts receivable 4,960 Sales 4,960 4. Accounts receivable 9,760 Bad debt expense 9,760 83. What Fs the accounts receivable balance on December 31, 20147 2. 793,200 c. 798,960 b, 798,160 6. 808,960 64. What is the required allowance for bad debt expense on December 31, 2014? a, 19,057 <. 29,357 b. 19,857 4. 32,857 65. What is the accounts receivable net of allowance for bad debts? a. 774,143 €. 779,503 b. 79,103 4. 779,903 PROBLEM 21: ‘You are auditing the accounts receivable and the related allowance for bad debts account of Sayote Inc. The contro! account of the aforementioned accounts had the following balances: Accounts Receivable 1,270,000 Less: Allowance for bad debt _ (78,000) Net Book Value 1,192,000 Upon your investigation, you found out the following information a. The company’s normal sales term is n/30. b. The allowance for bad debt account had the following details in the general ledger: - Allowance for Bad Debts July 31 Write off 24,000 | Jan.1 Balance 30,000 Dec. 31 Provision 72,000 c. The subsidiary ledger balances of the company’s accounts receivable as of December 31, 2014 Contained the following information: Debit balances ‘Credit balances Under one month 540,000 Kamote Co, 12,000 One to six months 552,000 ‘Kutchay Carp. Over six months 228,000 Kalachuchi Inc. P3,320,000 Additional information + The credit balance with Kamote Co. was for an overpayment from the customer. The company delivered additional merchandise to Kamote Co. on January 3, 2015 to cover such overstatement. + The credit balance of Kutchay Corp. was due to a posting error, the amount should have been credited to Kutchara Corp for a 60 day outstanding receivable. + The credit balance from Kalachuchi Inc. was a cash advance for a delivery to be made on January 15, 2015. d. It was estimated that 1 percent of accounts under one month is doubtful of collection while 2 Percent of accounts one to six months are expected to require an allowance for doubtful of collection. ‘The accounts over six months are analyzed as follows: Definitely uncollectible 72,000 Doubtful (estimated to be 50% collectible) 36,000 Apparently good, but slow (estimated to be 90% collectible) _ 120,000 Total 228,000 Required: Based on your audit, answer the fotlowi¢ between the control account and the 66. What is the entry to adjust any unlocated differ subsidiary ledger? ‘a. Sales 10,000 ‘Accounts receivable 10,000 b. Accounts receivable 10,000 Sales 10,000 ©. Sales 14,000 ‘Accounts receivable 14,000 4d. No unlocated difference 67. The adjusted accounts receivable balance on December 31, 2014, should be a. 1,212,000 c. 4,239,000 b. 1,227,000 d. 1,260,000 68. The required balance of the allowance for bad debts account on December 31, 2014, is a. 46,020 c. 64,020 b. 46,440 . 142,020 69. The entry to adjust the allowance for bad debts account is. a, Bad debts expense 46,020 Allowance for bad debts 46,020 b. Bad debts expense 52,020 Allowance for bad debts 52,020 ¢. Allowance for bad debts 6,000 Bad debts expense 6,000 d. Bad debts expense 40,020 Allowance for bad debts 40,020 PROBLEM 22: The substantiate the existence of the accounts receivable balances as at December 31, 2¢ Lucrative Company, you have decidec to send confirmation requests to customers. Below is 3 summary of the confirmation requests to customers. Below is a summary of the confirmation replies together with the exceptions. and audit findings. Gross profit on sales is 20%. The company is under the perpetual inventory method. Name of Customer Balance Per Books Comments from Customers Audit Findings cruz 50,000 30,000 was returned on Returned goods were January 2, 2015. Correct. received January 5. balance = $20,000 M representing p adjustment dated December by Lucrative in 2015. 29, 2014 cancels this Lazo 48,000 ‘You have overpriced us by The complaint is, P50. Correct price should be valid. 100. Sia 37,500 We received the gods only Term is shipping on January 5, 2015 point. Shipped in 2014 Yao 45,000 Balance was offset by aur —_Lucrative credited December shipment of your accounts payable for raw materials. 45,000 to record Purchases. Yao is 2 supplier Requirements: 70. If the necessary adjusting journal entry is made regarding the case of Mr. Cruz, the net income will: a. increase by ib. decrease by —c. decrease by. increase by 6,000 30,000 * 6,000 30,000 71. The effect on 2014 net income of Lucrative Company of its failure to record CM involving transaction with Mr. Frias a. P10,000 over b. P10,000 under c. P2,000.ever 4. P2,000 under 72. The actual number of units sold to Mr. Lazo is: a. 960 b. 320 © 480 d. 1,920 73. The overstatement of receivable from Mr. Lazo is: a, 32,000 , 6,000 «. 24,000 d, 16,000 74. The accounts receivable from Mr. Sia is: = ADQEThe Review School of Accountancy Page 16 of 26 a. correctly stated b. 37,500 over —_¢. 37,500 under d. 75,000 over 75. The adjusting journal entry ta correct the receivable fram Mr. Yao Is; Purchases 45,000 Accounts receivable 45,000 b. Accounts payable 45,000 Purchases 45,000 €. Accounts receivable 45,000 Accounts payable 45,000 d. Accounts payable 45,900 ‘Accounts receivable 45,000 PROBLEM 23: 218054 On Jenuary 1, 2014, YZA Inc. gave a loan to ABC Corp. amounting to P1,000,000 and received a three-year, 6% ngté. The note cals for annual interest to be paid each December.31.. The company ‘incurred origination-costs amounting to 2. The company charged P&0,000 to ABC as arigination fees. Asa result, the yield on the loan was at 8%, - At December 31, 2015, based on ABC's financial crisis YZA was not able to collect the 2015 interest and that only P600,900.9f the principal due December 31, 2016 will be collected, The P600,000 principal is expected to be collected in two equal instatiments on December 31, 2016 and December 31, 2018, — Required: 76. What is the origination cost incurred by YZA on January 1, 2014 in relation to the loans receivable? MG a. 28,458 , 108,458 Ree b. 51,542 d._ none MOS a 77. What is the impairment loss to be recognized in 2015? 3. 981,481 c. 525,554 294 b. 532,190 6. $42,170 7 s the correct carryin: e loans receivable from ABC o! 20157 2. 981,481 < 515,927 b. 532,190 4. 542,170 PROBLEM 24; ‘On December 31, 2013, ISIAH Company, a financing institution lent P4,000,000 to PSALMS Carp. due 3 years after. The loan is supported by an 8% note receivable. Transaction costs incurred to originate the foan amounted to P248,000. P374,000 was chargeable to Psalms as origination fees. Interest on ‘the loan are collectible at the end of each year. The yield rate on the loan is 9.25%. Isiah was able to collect interest as it became due at the end of 2014. During 2015, however, due to Psalms Corporation's business deterioration and due to political instability and faltering global economy, the company was not able to collect amounts due at the end 2015. After reviewing all available evidence at December 31, 2015, Isiah Company determined that it was probable that Psalms ‘would pay back only P3,400,000 collectible as follows: December 31, 2017 P1,400,000 December 31, 2018 1,000,000 December 31, 2019 600,000 December 31, 2020 400,000 As of December 31, 2015, the prevailing rate of interest for all debt instruments is 149%. Based on the above Information and on your audit, answer the following requirements: 79. What is the carrying value of the loans receivables as of December 31, 2014? 2. 3,874,000 b. 3,912,345 c, 3,954,237 d. 4,000,000 ‘80. What is the impairment loss to be recognized in the 2015 statement of comprehensive income? a. 1,336,188 bd. 1,294,296 c, 1,094,018. 1,656,187 81, What is the interest income to be recognized in the 2017 statement of comprehensive income? a. 228,818 b. 264,570 c. 159,542 od. 242,170 82, What is the correct carrying value of the loans receivable as of December 31, 20177a. 2,860,219 —b. 2,013,832 c. 1,724,789 gd, 1,884,332 PROBLEM 25: Visage Corp. had the following receivable financing transactions during the year: + On March 1, 2014, Visage Corp. factored P500,000 of its accounts receivables to BPI. As of the date of Factoring, it was ascertained that P20,000 of the accounts receivable is doubtful of collection. BPI advanced P350,000 cash to Visage Corp. and withheld P50,000 as factors holdback (to cover future sales discount and saies returns and allowances). The company incurred P10,000 direct transaction costs (legal fees and other professional fees) related to the factoring. The factoring was done on a without-recourse basis, thus transferring all significant risks and rewards associated to the receivable to BPI. + On May 1, 2014, Visage Corp. assigned P800,000 of its outstanding accounts receivable to BPI in consideration of a P500,000, 24% loan. BPI charged the company 2% of the accounts assigned as service charge. By the end of May, Visage Carp. collected P200,000 cash from the assigned accounts net of a P5,000 sales discount. By the end of June, Visage Corp. collected another 150,000 from the assigned accounts after P4,000 sales discount. The company accepted merchandise originally invoiced at P30,000 as sales returns and wrote-off 20,000 of the assigned accounts as worthless. It was agreed between parties that monthly collections shall be remitted to the bank as partial payment of the loan ana interest. + On July 1, 2014, Visage Corp. accepted from a custamer a G-month P600,000, 12% notes receivable for the sale of merchandise. On October 31, 2014, Visage Corp. discounted the note to BPI at a discount rate of 10%. The discounting was done on a without-recourse basis, thus transferring all significant risks and rewards associated to the receivable to BPI Requirements: 83. How much should be reported as gain/ioss in the receivables on the factoring of receivable on March 1? a. 90,000 b. 100,000 c_ 80,000 4. none ome statement on the transfer of 84. How much should be reported as gain/loss in the income statement on the transfer of receivables on the assignment. of receivable on May 1? 2, 16,000 b. 126,000 . 316,000 d. none 85. What is the carrying value of the 3 vabie if a. 391,000 b. 400,000 c. 450,000 . none 86. What is the carrying value of the loans payable related to the accounts receivable assigned as. of June 307 a. 150,000 b. 166,200 . 340,000 d. none 87. How much should be reported as gain/loss in the income statement on the transfer of receivables on the discounting of the note receivable on July 1? a. 10,600 'b. 1,400 . 24,000 d. none PROBLEM 21 The cash account in the ledger of Itang-tlang Company had a balance of P105,600 at December 31, 2014. An examination of the account, However, disclosed the following 1, The sales book was left open up to January 5, 2015, and cash sales totaling P15,000 were considered as sales in December 2. Checks of P9,300 in payment of liabilities were prepared before December 31, 2014, recorded in the books, but not mailed or delivered to payees 3. Post-dated customer collection checks totaling P7,800 are being held by the cashier as part of cash. The company’s experience shows that post-dated checks are eventually realized, 4. Customer's check for P1,500 deposited with but returned by bank, “NSF, on December 27, 2014. Return was not recorded in the books. 5. The cash account includes P40,000 earmarked for the purchase of a mini-computer which will soon be delivered 88. The cash balance to be shown on the balance sheet on December 31, 2014 should be:ReSA: The Review School of Accountancy Page 18 of 26 “2, P105,600 c. P58,400. b. P50,600 4. P60,500 PROBLEM 27; In connection with your audit of BIG BROTHER CORP. for the year ended December 31, 2014, you gathered the following information: Current account at Bank of the Philippine Istands 6,000,000 Current account at Equitable PC! Bank (300,000) Payroll account 1,500,000 Foreign bank account - restricted (in USD) ** 160,000 Postage stamps 3,000 [Employee's post dated check 12,000 JOU from a key officer 30,000 ‘Credit memo from a vendor for a purchase return 60,000 Traveler’s check 150,000 ‘Customer's not-sufficient-funds check 45,000 Money orders 90,000 (Petty cash fund (P12,000 in currency and expense 30,000 vouchers for P18,000) Treasury bills, due 3/31/15 (purchased 12/31/14) 600,000 Treasury bills, due 1/31/15 (purchased 1/1/14) 900,000 ‘Change fund 10,000 Bond sinking fund 1,000,000 **current exchange rate as of December 31, 2014 is at PSO for every USD1. Requirements: 89, What is the total cash and cash equivalent to be reported by the company in its December 31, 2014 balance sheet? a. 9,262,000 . 8,362,000 b. 8,380,000 d. 8,122,000 90. How much from the list above should be presented as part of Noncurrent assets? @. 1,000,000 . 4,300,000 b. 4,000,000 4. 5,500,000 PROBLEM 28: UHAWSATYO COMPANY General and Petty Cash Count ‘Audit Year: 2014 Date of count - January 5, 2015, 9:10 am Bills. and Coins Denom. “Bundles of 100 pcs Rolls. of SO. coins Loose P500 1 9 100 2 27 50 3 Ss 20 5 4 10 10 5 6 4 1 10 20 25 40 16 Checks: Maker Payee Date Amount T. Otis ~ customer Uhawsalyo 12/30/14 P11,920 R. Eyes ~ customer Uhawsaiyo 12/26/14 12,505 ©, Liever - customer Uhawsaiyo 1/2/15 5,707 F. Rancisco ~ customer Uhawsalyo 12/21/14 13,350 Uhawsaiyo ABC Co. 12/27/14 14,500 M. Doza - officer Cash Y/S/15 310 0. Campo * Cash 12/29/15 260 “Amount és for a return of travel advance made to the employee in an earlier period. Vouchers and 1ous Paid to Date AmountPNR - transportation expense 1/2/15 P35 Post office ~ pastage stamps 12/20/14 150 Italian Village ~ Christmas party 32/23/18 6,290 I. Dio ~ 1OU 12/27/14 300 Others L. Cash sales invoices (all currencies No. 17903 to 18112), PL00,500 2, Official receipts Number ‘Amount Form of Collection 31250 P560, cash 31251 12,505 Check 31252 1,202 Cash 31253 11,920 Check 31254 13,350 Check 3. Stamps of various denomination amounted to P80. 4. Annotation on a sheet of paper as follows: “Proceeds from emplayee contribution for Christmas Party, P9,500" 5. Petty cash per ledger, P15,000. Required 91. How much is the petty cash shortage as of January 5, 2015? a. 13,913 15,303 b, 14,503 d. none 92. The adjustment to correct petty cash fund involves a credit to petty cash fund at 3. 15,000 c. 14,988 b. 14,953 4. 14,688 93. What is the adjusted petty cash fund as of December 31, 2014? 3.0 ©. 12 b. 47 4.312 PROBLEM 2: ‘The Silver Company's Internal control over its cash transaction is very weak, The company's cash position at Decemt ‘The cash book showed a balance of P15,000, which included cash on hand. A credit of P150 an the bank's records did not appear on the company's books. The bank statement showed a balance of 12,300; and the outstanding checks were: 0100 - P120; 0201 ~ P100; 0300 ~ P230; 1501 - P110; 1510 ~ P140; and 1515 ~ P150. ‘The cashier removed all of the cash on hand in excess of P3,000 and then prepared the foltowing reconciliation: Balance per books, Dec. 31, 2014 15,000 Add: Outstanding checks: No. 1501 P110 1510 440 1515 150 300 P15,300 Deduct: Cash on hand 3,000 Balance per bank, Dec. 31, 2014 12,300 Deduct: Unrecorded credit 150 True cash, Dec. 31, 2014 P12,150 ‘94. What is the cash shortage? a. 300 «. 500 b. 400 d. 700 195. A correct reconciliation will show that the cashier's accountability for cash on hand is: a. 3,300 ©. 3,500 b. 3,400 d. 3,700 96. The adjusted cash in bank excluding cash on hand as of December 31, 2014 is: ‘a. 11,300 c. 11,600 b. 11/450 d. 11,850 97. The adjusted cash balance to be reported in the Statement of Financial Position as of Becember 31, 2014: a. 14,300 c. 14,600 — ADAGReSA: The Review School of Accountancy Page 20 of 26 b. 14,450 4. 14,850 PROBLEM 30: You are auditing the cash account of Carrera Inc. for the fiseal year ended July 31, 2014, The client has not prepared the July 31, bank reconciliation. The following information were made available: General Ledger Bank Statement Beginning balances 140,330 172,590 Deposits 751,680 Cash receipts journal 763,680 Checks clearing the bank (708,450) Cash disbursements (654,330) journal July bank service charge (2,610) Note paid by the bank (183,000) NSF check “(9/330 Ending balances 249,680 20,880 ‘Audit notes: a. Bank reconciliation in June included the following information: Bank statement balance, June, 172,590; Deposits in transit, P'18,000; Outstanding checks, P52,260, and; Balance per general ledger, June, P140,330. b. Checks clearing the bank in July, outstanding by the end of June was at P50,760. c. Checks clearing the bank in July and were recorded in the July cash disbursement journal was at 614,010, d. A check for P31,800 cleared the bank, but had not been recorded in the cash disbursement Journal. It was for a payment of an accounts payable. fe. Accheck for P11,880 was erroneously charged by the bank to Carrera Inc. f. Deposits included P18,000 from June and P733,680 from July. g. The bank charged Carrera Inc.'s account for a non-sufficient-fund check totaling _to 9,330. ‘The credit manager concluded that the customer intentionally closed its account and the owner left the city. The check was turned over to a collection agency. h. Anote for P174,000, plus interest, was paid directly by the bank under an agreement signed Four months ago. The note payable was recorded at P174,000 on Carrera Inc."s books. Required: Based on your audit procedures and appreciation of the above data, answer the following: 98. How much is the total outstanding checks as of July 317 a. 29,940 c. 41,820 b. 32,490 d. 10,020 99. How much is the depasit in transit as of July 317 a. 20,940 c. 18,000 b. 30,000. d. 27,330 100.What is the correct cash in bank balance as of July 31? a. 20,940 c. 32,820 b. 11,160 d. 9,060 101.How much is the cash in bank shortage as of June 31? a. none c. 2,000 b. 1,200 4. 2,200 PROBLEM 31: In the course of our audit of Edilberto Inc.'s cash in bank for the year ended December 31, 2014, you ascertained the following information: November 30 December 31 Cash per books 82,350 201,425 Cash per bank statements 535,410 689,085 Undeposited collections 41,005, 64,400 Outstanding checks 138,590 150,560 Bank service charges 3,600 3,000Insufficient fund check 41,250 Company's notes receivable collected by bank 359,075 404,500 The bank statement and the company’s cash records show the following totals: Checks and debit memos per tank statement, 1,091,865 Cash receipts per cash records ? Cash disbursements per cash records 2 Deposits and credit memos per bank statement 1,245,540 The insufficient fund check was redeposited in the same month. No entries are made to take up the return and redeposit. Requirements 102.What is the unadjusted book receipts in December? a. 1,227,685 €. 1,160,660 b, 1,182,260 d, 823,185 103. What is the unadjsuted book disbursements in December? a. 1,059,585 . 1,063,785 b, 1,063,185 d. 1,066,185 104. What is the adjusted book balance on November 30? a. 434,825 €. 441,425 b, 437,825, 4. 445,025 105. The adjusted bank receipts in December should be: a. 1,268,935 . 1,265,335 b. 1,268,337 d. 1,245,540 106. The adjusted bank disbursements in December should be: 2, 1,105,035 1,097,835, 1,103,835 d. 1,091,865 107. What is the adjusted book balance on December 31 a. 561,075 c. 605,325 b, 602,925 0. 644,175 PROBLEM 3 5 st ation HALALAN CORP.'s Halalan Corp. Bank Reconciliation: BPI Acct No. 0021261 May 31, 2014 Bank balance 652,000 Add: Deposit in transit 10,000 Total 662,000 Less: Outstanding checks No. 640 10,000 652 8,000 653 2,000 20,000 Adjusted balance 642,000 Book balance 570,800 ‘Add: Proceeds of note receivable collected in May 70,000 Deposit on May 31 nat recorded on books until June 2,000 72,000_ Total 642,801 Lass: Bank service charge 00. Adjusted balance 642,000 The June 2014 bank statement is shown below: Bank of the Philippine Island From May 31, 2014 to June 30, 2014 ‘Account No.: 0021261 Date Checks Deposit June 1 8,000 10,000 June 8 2,000 June 11 14,000 20,000 Bune 13 4000 DM 1,000 June 16 4000 ADNERES tee eee See June 21 12,000 56,000 June 27 18,000 dune 29 1,000 &C 1,000 EC june 30 200 SV june 30 3,000 OM SV ~ Service Charge DM — Debit Memo EC ~ Error Corrected CM ~ Credit Memo The paid checks accompanying this bank statement (all clearing in June) are the following: No. 652 8,000 No. 653 2,000 No. 654 14,000 No. 655 4,000 No. 657 12,000 No, 658 48,000 ‘The check register reveals that the last check issued in June is No. 659 for P5,000 and that check no. 656 is for P2,600. Cash received for the period June 22 through June 30 of P70,000 was deposited in the bank on July 1. The bank erroneously charged the company P1,000 on June 29 but immediately corrected the error on the same date. ‘The debit memos on June 13 and June 30 represent customers’ NSF checks returned by the bank. The June 13 NSF check was immediately redeposited without entry. The June 30 NSF check was redeposited on July 1 without entry. 108.What is the total bank receipts in June per bank statement? a. 87,000 b. 88,000 c, 77,000 d. 78,000 109.What is the total bank disbursements in June per bank statement? ‘a. 59,200 b. 58,000 c. 58,200 d. 63,200 110.What is the balance per bank statement on June 30, 20147 a, 676,800 b. 627,200 c. 732,400 d. 729,200 2aL.What isu ‘a. 88,000 cc. 146,000 4. 219,000 112. What is the total disbursement in June per books? a. 53,000 b. 57,400 c. 56,400 d. 63,200 113. What is the cash balance per books on June 30, 20147 a. 732,200 b. 729,200 c. 732,400 d. 676,800 PROBLEM 32: You are auditing the cash of Saluyot Corp. for the fiscal year ended September 30, 2014. The bank reconciliation prepared by the accountant of Saluyot Corp. for the manths of August is presented below: Bank balance, per bank statement P156,000 Add: Deposit in transit, August 31. 2,700 Total 158,700 Less: Outstanding checks: No. 547 P600 S61 5,400 562 4,200 565 1,800 12,000 Adjusted balance ~P146,700_ Book balance, per general ledger 120,000 Add: Proceeds of note receivable collected by bank in August 24,000 Deposit made in bank on August 31 nat recorded on books Until September ____3,000_ Total 147,000 Less: Bank Service charge Adjusted balanceIme RevrEW Sco! or Accountancy Page 23 of 26 There was no available bank reconciliation for the month of September, instead, the accountant Provided you a copy of the September bank statement to aid you in your audit. ‘The September bank statement included the following bank debits and credits: Date Particulars Debits Credits August 31 September i Chk #561 5,400. 2,700 September 6 Chk #562 4,200. September 9 Chk #565 1,800 30,000 September 12 420 OM 420 September 15 Chk #566 3,000 September 17 600 September 20 chk #567 2,100 42,000 September 27 Chk #569 4,320 September 29 300 EC 300 FC September 30 1,320 SV September 30 900 OM September 30 Chk #570 5,460 SV—Service charges Di4—Debit Memo EC—Error Corrected CM —Credit Memo Further investigation revealed the following information: a. All book reconciling items during August has been recorded in September b. The check register revealed that the last check issued in September was No. 571 for P3,000 and that check No.568 was P7,200 c. Cash received fe October 1 the period September 25 through 31 of P26,200 was deposited in the bank d. The debit memo on September 12 and September 30 were customer NSF checks returned by the bank. The check on September 12 was immediately redeposited without entry. The check returned on September 31 was redeposited by the client in the bank on October 1 also without entry. 600 to the company’s account Required: Based on your audit procedures and appreciation of the above data, answer the following: 114.How much is the unadjusted bank balance as of September 30, 2014? a, 101,100 b, 109,200 ©. 192,300 d. 202,800 115.How much is the total book receipts for September? a. 75,420 b. 106,620 cc. 127,200 d. 129,900 116.How much is the total book disbursements for September? a. 25,080 b. 25,380 . 26,280 d. 29,220 117.How much is the unadjusted book balance as of September 30, 20147 a. 221,820 b. 222,120 c. 224,620 d. 224,920 118.How much is the adjusted cash balance as of September 31, 2014? a. 219,000 b. 219,600 ¢. 220,200 d. 221,820 PROBLEM 33: The following information was obtained in connection with the audit of Wise Campany’s cash account as of December 31, 2014 Outstanding checks, 11/30/2014 P16,250 Outstanding checks, 12/31/2014 12,500 Deposit in transit, 11/30/2014 12,500 Cash balance per general ledger 12/31/2014 37,500 Actual company collections from its customers during December 152/500 Company checks paid by bank in December 130,000 Bank service charges recorded on the company books inReSA: The Review School of Accountancy Page 24 of 26 December 2,500 Bank service charges per December bank statement 3,250 Deposits credited by bank during December 145,000 November bank service charges recorded on company books in December 1,500 The cash receipts book of December is underfooted by P2, 500. The bank erroneously charged the company’s account for a P3,750 check of another depositor. This bank error was corrected in January 2015. 119.How much is the deposit in transit on December 34, 2014? 3, 5,000, b. 20,000 ce. 22,500 d. 17,500 120.The total unrecorded bank service charges as of December 31, 2014? a. 750 b. 2,250 . 1,750 d. 4,250 121.What is the total book receipts in December? a, 150,000 b. 152,500 c. 155,000 d. 147,500 122.What is the total amount of company checks issued in December? ‘a. 130,000 b. 123,000 c. 133,750 d. 126,250 123.What is the total book disbursements in December? a. 123,750 b. 128,500 c. 126,250 d. 128,750 124.What is the book balance on November 30, 2014? a. 16,250 b. 21,250 c. 37,500 4. 35,000 125.What is the bank balance on November 30, 2014? a. 23,000, b. 18,500 c. 43,500 d. 16,250 126.What is the total bank receipts in December? 2 ood b. 140,000 ¢. 145,000 d. 150,000 127.What is the total bank disbursements in December? a. 154,500 b. 132,500 c. 129,500 4. 137,000 128. What is the bank balance on December 31, 2014? ‘a. 21,500 b. 26,500 . 31,000 d. 33,250 PROBLEM 34: In your audit of I-Bot Inc.'s cash account as of December 31, 2014, you ascertained the following Information: The bookkeeper's bank reconciliation on November 30, 2014, is as follows: Bank balance per bank statement, November 30 24,298 Add: Deposit in trans Total Less: Outstanding checks ‘ No. 3408 P40 3413 300 3414 6,820 3416 3,924 3417 800 _ Balance Add: Bank service charge for November Balance per books *Entered in Check Register in December The Cash Receipts Journal shows a total receipts for December of P371,766, The Check Register reflects total checks issued in December of P377,632. A collection of P5,912 was recorded on company books on December 31 but was not deposited until January 2, 2015. ‘The balance per bank statement at December 31, 2014, is P17,516. This statement shows total receipts of P373,502 and checks and other charges paid of 380,284neon 7 Your examination revealed the Following additional information: a. Check no, 3413 dated November 24, 2014, was entered in the Check Register as P300, Your examination of the paid returned with the December bank statement reveals that the amount of the check is P30, b. Check mo. 3417 was mutilated and returned by the payee. A replacement check (no. 3453) was issued. Both checks were entered in the Check Register but no entry was made to cancel check no. 3417. The December bank statement includes an erroneous bank charge of P480. (On January 3, 2015, the bank informed your client that a December bank charge of P42 was omitted from the statement. ‘e. Your examination of the bank credit memo accompanying the December bank statement discloses that it represents proceeds from the note collection in December for P4,000.. f. The outstanding checks at December 31, 2014, are as follows: as No. 3408 ado No. 3417 800 No. 3418 2,814 No. 3419 5,788 1129, What is the total book disbursements for the month of December? a. 377,668 b. 377,710 c. 377,632 4. 377,596 130. What is the book balance at December 31? a. 9,832 b. 9,868 c. 9,754 4. 9,796 131,What is the total outstanding checks at December 317 a, 8,602 b. 9,072 c. 9,042 d. 9,842 132.What is the adjusted bank balance on November 307 a. 16,690 b. 16,732 c. 16,804 4. 133, What is the adjusted book receipts for tne month of December? ‘a, 375,724 D. 371,766 ¢. 371,238 a. 375,766 134,What is the adjusted book disbursements for the month of December? a. 377,590 b. 377,662 ¢. 377,674 a. 377,632 135.What is the adjusted book balance on December 31? a. 14,624 b. 14,866 14,908 d, 14,782 PROBLEM 35; Halal Corp. has a current account in PNB. Your audit of the company’s cash account reveals the following: Balances taken from the company’s general ledger: Cash balance, Novernber 30, 2014 637,860 Cash balance, December 31, 2014 576,420 Receipts, December 1 ~ 31, 2014 306,220 b. Balances taken from the December bank statement: Bank balance, November 30, 2014 685,180 Bank balance, December 31, 2014 637,220 Disbursements (debit) 356,080 c. Outstanding checks, November 30, 2014 (P26,140 was paid by the bank in December), 64,140. . d. Checks written and recorded in December; not included in the checks returned with the December bank statement, P36,080. e. Deposit in transit, November 30, 2014, P15,260. f. Deposit in transit, December 31, 2014, 16,140, 9g. A bank credit memo was issued in December to correct an erroneous charge made in November, P1,500. h. Note collected by bank in December (company was not informed of the collection), 2,060.R@SA: The Review School of Accountancy Page 26 of 26 i. A check for P2,020 (payable to a supplier) was recorded in the Check Register in December as 3,000, }. Acheck for P2,240 was charged by the bank as P2,420 in December. k. Halal Co, issued a stop payment order to bank in December. This pertains to a check written in December which was not received by the payee. A new check was written and recorded in the Check Register in December. The old check was written off by a journal entry also in December, P780. |. Bank service charge, November 30, 2014, P60. 136.What is the total book disbursements in December? ‘a. 367,660 b. 244,780 c. 369,720 d. 368,540 137.What is the total bank receipts in December? a. 260,160 b. 308,120 ©. 306,060 4. 309,020 138.What is the total outstanding check on December 317 ‘a. 100,220 b. 38,000 c. 62,220 d. 74,080 139,What is the adjusted bank balance on November 307 a, 636,300 b. 685,180 c. 637,800 4. 634,800 140.What is the adjusted book receipts in December? a. 307,500 b. 306,220 c. 303,380 4. 305,440 141. What is the adjusted bank disbursements in December? 2. 353,980 b. 365,840 c. 345,960 d. 366,020 142.What is the adjusted book balance on December 31? a. 577,500 b. 577,400 c. 576,420 . 579,460