Aung INSTRUCTIONS: Select the best an . sw following questions. | ALL questions pM MUST be atte mpted. Mark only one answer for eaSOTY_ and the answer sheet provided. Strictly NO ERASURES allem or ler your examination TOW Use PENCIL NO. 2 only. GOODLUCKIG "Sheet WALID PART I — AUDITING THEORY 1. As the acceptable level assurance directly padi e 3. Tests of controls should increase. b. Tests of controls should decrease. Analytical Procedures should increase. |. Analytical procedures should decrease. isk decreases, the 2. Which ps a poe P lowing procedures most likely would provid. a paleence an whether an entity's internal control nsist rreran cities are consistently applied to prevent or detect 2. Reperforming the act for a sample of Performing anal ‘A ple of transactions, ical Besomming analytical procedures using data aggregated Vouching a sa 5 uching 2 sample of transactions directly related to the 4. Ingui ‘ iquiring the entity’s personnel applying the activities. 3. Which of the following is an analytical procedure? 2. Observing an entity’ tity’s employee pre| BBSt due acount bys employee prepare the schedule of Senna contmation. requests to an_entiy's pri Inopecnns Ceri the existence of account receivable True en entity's analysis of accounts receivable for Inspecting supportir ‘accounts pape shipping documents of recorded ao inom seTB using ed due to the ‘ome statements were misstated | catries that involved debits and credits to eof expense and revenue accounts, ly could have detected this fraudulent 4, An entity's recording of journal an unusual combinat The auditor most financial reporting by 2. Performing analytical procedures: ti. investigating the reconciliations between controlling accounts and subsidiary records. ¢. Tracing a sample of journal entries to the gener ledger. §; Evaluating the effectiveness of internal control. ive requests 5. When an auditor does not receive replies to posith for year-end accounts receivable confirmations, the auditor would least likely 3. Ask the client to contact the cu: the confirmations be returned. b. Vouch subsequent collections. ¢. Inspect shipping documents. d, Inspect sales invoices. istomers to request that 6. Which of the following auditing procedures most likely would provide assurance about a manufacturing entity's inventory existence and completeness simultaneously? ®. Testing the entity's computation of standard overhead rates. b. Obtaining confirmation of inventories pledged under loan agreements. Reviewing shipping and receiving cutoff procedures for inventories. d. Tracing test counts to the entity's inventory listing. 7. In which of the following situations performing procedures at ‘an interim date is most appropriate? a. Tests of controls have been applied. b. Additional audit risk is controllable. c. ‘Accounts can effectively be sampled during year-end audit work. ‘AUD FinPBI0.19 ‘Page 3of 28 Wewpriccom.oh ZAuciting d. Ther re are no significant fluctuations sete the accounts si that hi 'ave occurred in ince the previous year, 8. Which of the followi audi ing st \ditor’s attendance at the nae is false regarding a the a. It is the auditor's res b. The auditor observes client sta é . The auditor reviews procedure: ¢. If the results of the audit: 9. Which of the following sampl monetary unit sampling (Ms)? Hi -ount? pon Bee sibility to. Organize the Invent tory ff to. deter mine i Being followed ee jete and slow-moving inventory. "9 42™aged, sles tors’ aes test col Sore auditor can request that nfeavers ye ry is inventory count procedures are lon methods is applied in 2. Random b. Systematic & Hephazard |. Systematic random 10. Which of | th 'e following indi pS Sey icates. an increased risk of a. b. ic d. a resignation of CFO. agement is d small company. lominated by company founders in a issuance of debt durin: thi Pee eet curing the year. 11. Which of the followi lowing is correct about audkoreomsmunications abot feud? Bs: Fraud with ees apa CE On ie Thiet! statements eels ae” at involves senior 7 reported directly to the Maiegpment Yspbuld be See re involved. audit committee regardless of the SS aay « 12. An audi si from the engagement a, Client receives b, Evidence 13. 14. A user aut Page 5 of 2! ses vancial statements iditor through use h added to the material effect on the fin ly be disclosed by the 28 ‘of a matter” paragrapl Fraud with 2 should ordinaril of an “emphasis audit report. The auditor the entity und ‘has no responsibility to disclose fraud outside jer any circumstances: 1; employees have paid likely would withdraw +; who discovers that 2 client nil bribes to public officials most at if the financial assistance from a government agency. the illegal acts that is necessary to prove that were committed does not exist. c Notes to the financial statements fail to disclose the employees’ actions: 4. Employees’ actions affect the auditor's al management's representations. to rely on ‘the risks of material misstatement of fina | statements Inoy ne when | expeseisenn lia field other than ey snting 1s needed for management to prepare the financial statements. a. Increase. b. Decrease. c. Remain the same. d, Cannot be determined. of a service auditor may \ditor who uses the work itor in the user auditor's Tefer to and identify the service audi report if the | 3. Service auditor is a related party. b. User auditor indicates 2 div! ‘of responsibility. User auditor modifies opinion related to the service auditor’s work. greater 4. Service auditor's work provides the auditor assurance of reliability. —Auditing ser 354 is 5 Which of the following is not an IT general a. Full testing procedures using test dats wren computer applications ata when develo, ‘ ping . Access controls ¢. Disaster recovery procedur d. Hash totals = 16. Which of the followi ng computer eens. y isactions? b. Integrated test facility (ITF). c. Parallel simulation. d. ‘Input controls matri 17. Which of the folio Bien of wing is the most serious password security a. Users have a ee \ccounts on several systems with different b. Users copy their passwords on note in their wallets. ee en as c. Users are assigned passwords when accounts are created, but they do not change them. d. Users select passwords that are not listed in any online dictionary. 18. Which of the following procedures would an auditor least kely perform in obtaining evidence about subsequent events? a b. Compare the latest available interim financial statements with the financial statements being audited. Investigating personnel changes in the accounting department occurring after year-end. Ineestigate changes in Jong-term debt occurring after year-end. Yrauiring as to whether any unusual adjustments were made after year-end 19. Maffie Corporatio Faye Torte ——Cwcensprtcicom.oh < seTB ‘ucting n presents comparative financial statements wethd December 31, 2019 and 2018- ‘ABC and Co., CPAS is erdetewly appointed auditor for the Yea 2019. Prior year ficaneiat statements were audited DY ‘another auditor who tReressed an unmodified opinion. tr the audit ended on March 31, 2020, the auditor's findings include: Maren punts receivable as of December 34, 2019, though not pervasive, is materially misstated. o eeeaet’s production facilities were razed by fire on february. 10, 2020. This event has been adequately feclosed in the notes to financial statements: In the auditor's report, the auditor most likely should include a(an) alan) modified opinion and an emphasis of matter paragraph. b. Qualified opinion and an emphasis of matter paragraph. Unmodified opinion, an emphasis of matter paragraph, and an other matter paragraph. 4. Qualified opinion, an emphasis of matter paragraph, and an other matter paragraph. 20. when an audit client publishes an annual report containing Wfocmation other than the financial statements and auditor's report, the auditor should repr hot read the other information as itis outside of the financial statements. b, Perform inquiry and analytical procedures to ascertain whether the other information is reasonable. c. ‘Report findings about material inconsistency. §. Perform the appropriate substantive auditing procedures to corroborate the other information: 21. Accepting an engagement to examine 28 entity's financial projection most likely would be appropriate if the projection were to be distributed to all employees who work for the entity. B.A stockholders of record as of the report date. ‘U0 -FinPB10.19Auditing seta c. Potential. stockholders whi 4. Tepistration statement, eS) ee . A bank with which the entity is negotiating for a joan. 22. Which of the follo wing is le Which ofthe following is least likely to be perform in a review a. Inquiries about significant events, . Inquiries of the client's customers. . Obtaining an understanding of th © loca bye et ng of the accounting prnpes Comparing current financial ehaee onthe ctor yes. statement amounts with 23. According to PI ppine Standards on Quality Cont Beteeigeee tial yesntclievewer evel 3. Only the uncorrected misstatements. es Hie mero but not the internal control report. essment of risks ident d. The documentation. ee 24. ABC & Co., CPAs, have provided annual audit and tax compliance services to Xtreme Corp. for several years. ABC has overdue fees relating to prior year’s audit. Under the Code of Ethics, which of the following arrangements wil permit ABC to issue the audit report for the current year? a. Xtreme sets up a two-year payment plan with ABC to settle the unpaid fee balance. b. ABC shall require the engagement partner to conduct thorough review of working papers. c. ABC obtains partial payment of overdue fees. 4. Xtreme engages another firm to perform the fieldwork, and ABC is limited to reviewing the workpapers and issuing the audit report. 25. The auditor of A Co wishes to reduce audit risk. Which of the fhe auditor take to achieve this? (1) _ Increase sample sizes (2) Reduce control risk (3) Assign more experienced staff to the engagement team $a an P60-19 seTB ‘sting i a. (1) only b. (1) and (3) c, (2) and (3) d. (4), (2) and G) understanding with 3 performed for each least likely included in 26, an auditor is required to establish 6) Mlent. regarding the services to be engagement. Which of the following 'S ‘an audit engagement letter? ‘3. Management's responsi activities of employees that. may misstatement. b. The auditor's responsibility for ensuring that the audit Committee is aware of any significant deficiencies in . nderstanding as to the reasons why the audit shou! accepted. , Disagreement with management regarding accounting principles and auditing procedures. be 28. In performing interviews and examining documents related f0 preliminary work in a financial statement audit, an auditor Prentifies @ business risk associated with plans for 2 new product line. ‘What should the auditor do as a result? a. Modify the scope ‘of the engagement to include an Mnalysis of the budget for the new product line and ‘AUD FinP 610.19 ‘wonwepric.com.nh xa sete insider the new risk in con) yuncti it the Gudast Roe t unee ene ie newly identified risk in co in i Known business sks and consider whether there fay immediate consequence for the ae ean x vi ig te at various levels of the audit. he e the newly identified ri ¥ isk in conjuncti economic creustones ltd exclusively to the new Brod ine apd eocies whether hee on immediate ie risk of mat affected classes of transactions. He ar ae Modify the financial statement disclosures to include the newly identified risk if it is likely that the new product line will have an adverse effect on the company’s profitability. 29. Se ae of an entity's internal control I auditor is required to obtain knowledge about the a. Controls related to each principal transaction class and account balance. b. Consistency with which controls are currently being applied. c. Effectiveness of controls that have been implemented. d. Design of the controls pertaining to internal control components. 30. Which of the following is correct in considering internal control in an audit of financial statements according to PSAs? cometh auditor should separately ‘communicate those significant deficiencies pensidered to “be material weaknesses. b. The auditor’s consider necessarily disclose al c. Report that there are no es design or Of eration of internal col 4. Ae un controls. may limit the severity of @ material weakness oF significant deficiency ation of internal control would not significant deficiencies that exist: nificant deficiencies | the 31.in evaluating 2 company’s syste ses ‘using vm of internal control, the Uyeer kthrough tests: 1) Performs walkthrous Completes eee gab inion) ett questionnaires 3 (a) Revises the audit strategy and audit plan {4) Performs tests of contro! which of the following correctly summarizes the order in which the above steps would take place? af 21304 evaluation 3,2,1,4 2,1,4,3 1,2,4,3 eose 32. The entity’s control on comparing the invoiced prices on prenumbered sales invoices to the. entity's authorized price Prt eupport management's financial ‘statements assertion of ‘a, Valuation or allocation. b. Completeness. . Existence or occurrence. d. Rights and obligations. 433.1n a purchasing process, which of the fellow iiaesiiaaaas performed by the user groups or stores 3. Reconcile the open invoice file. . Inspect goods upon receipt. ¢. Authorize requisitions of goods. d. Negotiate terms with vendors. 34, At Flowers, when customers call the company, thelr orders oF Gken by clerks who take details of the flowers to be arsivered, the address to which they are to be delivered, and the sccount details of the customer. The clerks Input these vTerailg into the company’s computer system (whilst the order is being taken) which Is integrated with the ‘company's inventory control system. Siinigt a Page ii of 26 wonw. prtecom.nn “Aub. FinPBI0-19Avatting The audit junio BS r has made thi Ths @ follow Fate: cet, processing and recording of the cryre System pero posted on a weekly base wos: fae 00k and accounts receivable leiger sry ease recorded on r sequent Pte Sequentilly numbered order forms. One on ea the sales clerk, one copy is forwarded to th ee for the dispatch of inventory, and one co rene ene SST as evidence of the order. PY, oe The sales clerk regulary petforms reviews of the st s ve system, matching the price of fl aren fa a up-to-date price list. SE aay ‘0 ensure completeness of ord lers, a sequen Piss and any missing documents are investigated. 7 juni oH as imeral cpl activities described above would re rn bcrrans occu a. 2only b. 3only c. 4only d. 2and3 35. You are beginning the 20x8 audit of Toastco, a manufacturer of various kitchen products. Which of the following identifies @ situation most likely to increase the risk of misstatement arising from fraudulent financial reporting? Seethe household products industry seems stable, and is not rapidly growing. b. Toastco controls approximately 5% of the market. ©. Toastco reported a strong fourth quarter that brought it up to expectations for earnings per share. d. ‘Toastco has one relatively profitable product, and a number of products that are not as pro table. Auditing | PART II - AUDITING PROBLEMS PROBLEM NO. 1 In the audit of Lylia Company's © following information: ‘the company's bookkeeper prepared vconciliation as of November 30, 2019: Bank balance - 11/30/2019 Undeposited collections Bank service charges Bank collection of customer's note Outstanding checks: Book balance - 11/30/2019 ‘Additional data are given as follows: a. Company recordings for December: ‘Total collections from customers Total checks drawn b. Bank statement totals for December : Charges Credits c. Check no, 1159 dated November 25, of a voucher “ks returned by the bank, the actual 3,000 in payment examination of the che ‘amount of the check was P30,000. d. Check no. 2113 replace a mutilated check (no. the payee. Both checks were 5,000, but no entry was Mat sh account, you obtal dated December 20, 1767), which was returned by ecorded in the amount drawn, ‘de to cancel check no. 1767. seTB ined the the following bank 90,800 5,000 100 (8,000) Amount 3,000 5,000 2,000 (10,000) P7Z,900 165,000 98,000 123,800 169,000 2019, was entered as for 30,000. Upon 2019 was issued to __ ‘AUD. FinPBIO.19Auditing Sete € The December bank statement included a ch r ‘ at check drawn by f- Undeposited collections on December 31, 2019 - P8,000 9. The service charge for Decem! ber by the bank to another cient. 10” Which was chargea h. The bank collected a not te receivable of P7,000 or 28, 2019, but the collection was not received on tre noe amy eat ime to be The outstanding checks on December 31, 2019, were: Checiio, amount Check No. — Amount 000 2910 P2,300 2856 1,300 2825 4/100 QUESTIONS: Based on the above and the result of your audi following: determine the 36. Unadjusted cash balance per books as of December 31, 2019 a. P152,800 c, 144,900 b. P152,750 d. P165,700 37. Adjusted cash balance as of November 30, 2019 a. P85,800 c, P63,800 b. P58,800 d. P90,800 38. Adjusted book receipts for December 2019 a. P170,500 cc. P172,000 b. P182,000 d. P173,000 39. Adjusted bank disbursement for December 2019 a. P120,150 c. P125,150 b. P 76,150 d. P 98,150 40. Adjusted cash balance as of December 31, 2019 a. P132,650 c, P137,800 b. P137,650 d, P134,650 ee yr 0 Wins ta af OR www. prtc.com.ph ea seTB Auditing PROBLEM NO. 2 on January 4, 2019, Esme Corp. paid P1,296,000 for 40,000 inary shares of Ralda Company. The investment represents 2 otee interest in the net assets of Ralda and gave Esme the abilty 20te tneise significant influence of Ralda’s operating and financial poliey decisions. Esme received dividends of P3 per share 0 Pecember 4, 2019, and Ralda reported net income of P640,000 for the year ended December 31, 2019. The fair value of Ralda’s brdinary share at December 31, 2019, was P32 per share. The Book value of Ralda’s net assets at the time of purchase was 3,200,000 and: The fair value of Ralda’s depreciable assets, with an average remaining useful life of 8 years, exceeded their book value by 320,000. «The remainder of the excess of the cost of the investment over the book value of assets purchased was attributable to goodwill QUESTIONS: 41.What amount of the investment cost is attributable to goodwill? a. 240,000 cc. 336,000 b. P 96,000 d. 144,000 42. What amount of investment income should be reported in Esme’s income statement for the year ended December 31, 2019? a, P120,000 <. P180,000 b. P108,000 d. 192,000 43, What is the carrying amount of the investment in Ralda ordinary shares on December 31, 2019? a. 1,280,000 c. P1,296,000 b. 1,356,000 d. P1,368,000 Faget 128 ‘AUD.FinPBI0.19pe, SETB 44. Assume that the 40,000 shares represent 10% intere: Asse ts of Ralda rather than 2 30% Interest. What arom of investment income should be reported in Esme’s mount Statement for the year ended December 31, 20197 res a, P120,000 c. P 60,000 b. P 64,000 d. P180,000 45, Assume that the 40,000 shares represent 10% interest in the fet assets of Ralda rather than a 30% interest. What is the Carrying amount of the investment in Ralda ordinary shares at December 31, 2019? ‘a. 1,296,000 c. P1,280,000 b. P1,356,000 d. P1,236,000 PROBLEM NO. 3 | 2014, Guine Corporation issued 2 10 per cent ane! bonds with a face value of P4,000,000 maturing on eet 024 | Each 71,000 bond is converse Tks ordinary shares of Guine at 2 conversion price of P25 per share. futerest is payable half-yearly in cash.” At the date of issue, Guine could have issued nonconvertible debt with 2 ten-year term bearing a coupon interest rate of 11 per cent uary 1, 2019, the convertible bond has 2 fat value of 4,400,000. Guine' makes 2 tender offer to the neuer repurchase the bonds for P4,400,000- The holders of he 2,000,000 bonds accepted the offer. At the date of repurchases Guline could have issued non-convertible debt with a fi term bearing a coupon interest rate of 8 per cent (On December 31, 2019, to induce the holders of the remain bonds to convert the bonds promptly, Guine reduced conversion price to P20 if the bonds are converted bel et Guine’s {, 2020 (ie within 2 months). The market pri cat ofdinary shares on the date the terms are ‘amended i share. SeTB austing QUESTIONS: pased on the above and the result of your audit, answer the folowing: (Round off present value factors to 4 decimal places) 46. The proceeds from issuance of convertible bonds to be llocated to the equity component is a. P235,520 cc. P136,760 b, 239,120 dP 0 47. The carrying amount of the bonds on December 31, 2018 is a. P3,849,120 cc. P3,113,180 b. P3,885,940 d, P4,000,000 48. The amount to be recognized in profit or loss as a result of the repurchase of the bonds on January 1, 2019 is a. P200,000 c. P180,400 b. 203,880 d. P237,730 49, The repurchase of the bonds on January 1, 2019 decreased equity by a. P439,530 c. P76,630 b. P 37,710 ce, © 50. The amount to be recognized in profit or loss as a result of the amendment of the terms on December 31, 2019 is a. 640,000 c. P64,000 b. P 10,000 cea PROBLEM NO. 4 Harith Corporation was authorized at the be: ginning of 2017 with 540,000, P100 par value, ordinary shares. At December 31, 2017, the equity section of Harith was as follows: Share capital, par value P100 per share; authorized 540,000 shares; Issued 54,000 shares PS,400,000 Share premium 540,000 Retained earnings 810,000 Total equity 6,750,000Auditing On May 10, 2018, Harith issued Sy P10,800,000. A 5% share dividenaleaee ond nats 30, 2018 and issued on November 10, 201 on Septet record on October 31, 2018. Market value of eoysta'ehoidee st P1i0 per share on declaration date, “The prom tina share yet year ended December 31, 2018 was P855,000,. "fth ‘fone During 2019, Harith had the following transactions: Feb. 15 Harith reacquired 5,400 ordinai Barth FY Share for oS pe May 15 Harith sold 2,700 treasury shares for F120 per share jun 30 Issued to shareholders one right for each share hey to purchase two additional ordinary shares for ping per share. The rights expire on December 31, 209, Aug. 15 45,000 rights were exercised when the market Yale of ordinary share was P130 per share. Sep. 30 72,000 rights were exercised When {he Matis aie of the ordinary share was_P140 per share: 01 Harith declared a cash dividend of P2 per share me Payable on January, 15, 2020 t0 shareholers record on December 31, 2019. a Harith, retired 1,800 treasuly 28 on tae Beer he market value of the ordinary shat tl share. ' Dee sie aprotie to 70k es 900,000. f a ee it of your aud, etm ‘ed on the above and the be Patowing as of December 31, _ 340) Share capital c P3750,000 + 9 or p38,520,000 S38, avsting seTB hare premium ee 8,329,500 c. P5,413,500 b. 8,338,500 d. P8,266,500 53. Retained earnings a. P1,080,000 cc. P1,017,000 b, P1,002,600 4, P1,008,000 54. Treasury shares a. P18,000 <. P85,500 b. P90,000 dP 0 55. The amount of time spent verifying owners’ equity Is frequently minimal for closely held corporations because: 3. These companies are so small that it is not necessary to audit the capital section. b. The few owners all have access to the books so the auditor spends more time on accounts like liabilities, Which affect outsiders. c. There are few if any transactions during the year for the capital stock accounts, except for earnings and dividends. d. There is no public interest in these companies. PROBLEM NO. 5 Your firm has been engaged to examine the financial statements of Lunox Corporation for the year 2019. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation. The client provides you with the information below. Lunox Corporation Statement of Financial Position December 31, 2019 Assets Current assets P1,881,100 Current liabi P 962,400 Other assets 5,171,400 Long-term liabilities 1,439,500 __. Capital 4,650,600 P7,052,500 PZ.052,500 age 19 of 28 www.prtgcomoh Aud. FinPB10.19Audit ng seTB. oo avdting « An analysis of current assets discloses the following: Cash (restricted in the amount of P400,000 for -the supplementary information below iS also provided. plant expansion) P 571,000 3.4, P750,000 of ( May 1, 2019, the compan} 7 Investment in land 185,000 Beards Mo finance plant expansion. The long term bond Accounts receivable less allowance of P30,000 480,000 sereement provided for the annual payment of interest every anventoney 645,100 2 The existing plant was pledged 95 ‘Security for the loan. P1,881,100 May craight-line method for discount ‘amortization. = Other assets include: bp. The bookkeeper made the following mistakes! Prepaid expenses Pp 47,400 in 2017, the ending inventory was overstated by P183,000. Plant and equipment less accumulated : The ending inventories for 2018 and 2019 were correctly depreciation of P1,430,000 4,130,000 computed. Cash surrender value of life insurance policy 84,000 2, 1 2019, accrued wages in the amount Of 275,000 were ‘Smitted from the balance sheet and these ‘expenses were Unamortized bond discount 49,500 Notes receivable (short term) 162,300 fot charged on the income statement. Goodwill 252,000 3, In 2019, a gain of P175,000 (net of tax) on the sale of Land 446,200 Uetain ‘plant assets was credited directly to retained 75,471,400 earnings. Current li fies includ c eH ones on pene ce 2020, prior toca oh me , you aT heavy damage because recent fire to one of 116 Accounts peyote F108 ae ewe plants; the loss will not be reimbursed BY ees pare 21) 145,000 insurance. The plant has a carrying amount of P1,200,000 on : fire. Share premium reserve 150,000 tne date of ffs 262,400 QUESTIONS: * Long-term liabilities include: Based on the above and the result of the audit, answer the Unearned revenue ee following: Dividends payable . @ _750,000 6. The adjusted current assets 2S of December 31, 2019 is 8% bonds payable.(due May 1, 2024) De eae Seo ac a b, 1,505,800 d. P1,553,200 + Capital includes: a 57. The adjusted current liabilities as of December 31, 2019 Is Retained earnings P2,810,61 a. P1,619,500 c. P1,659,500 Share capital, par value P10; authorizes b. P1,130,000 d. P1,419,500 d 1,840,0 "20,0000 shares, 184,000 shares Iu 4,650,690 58, The adjusted noncurrent liabilities as of December 31, 2019s a. P907,400 c. P 857,900 b. P864,500 d. P1,554,000 i pe ny rr 1039 ——— Sareea mA page onze waaecricam.sh “io FinPB10-19Auxiting ser; 59. The adjusted equity as of December 31, 299 d a. P4,525,600 ©. | P4,329,09 b, P4,519,000 d. pa, 479,000 60, When a subsequent event provides evidence about that existed at the balance sheet date, the 4 Gout Conditions Which of the following? auditor should de a. Assign a specialist. b, Ensure that the financial stat ements Fefiect the information, including any nese TUsted to disclosures, ma footnote Shop for an opinion that fits th p € desired ty d. Provide management with a new engagement Ta document the terms Of the revised arrangement, ee PROBLEM NO. 6 The general ledger trial bal: r lance of Masha Corporati he following balance sheet accounts at Decemtey o "3019 pee. 4 : P1,056,000 ie a receivable 1,220,000 ventory “4al) Trading securities 200,000 Available for sale investments 500,000 . Prepaid insurance 50,000 Deferred tax asset 150,000 Bank overdraft 100,000 Additional informatio ‘sh * The sales sales totaling aie let Open up to January 5, 2020, and cash * Checks of 93 99900 Were considered as sales in December. Before December 441 P2¥™ent of liabil ‘mailed or delivered tg, rote Fecorded in the books, but not PRDTB aa Fin BIOS SETB avdting r checks totaling P78,000 are being held by the « Post-dated Cash. The company’s experience shows that jer as part of see .d checks are eventually realized. Poe daer's check for P15,000 deposited with but returned by * Bank, “NSE” on December 27, 2019. Return was recorded in the books. + The Cash account includes P400,000 of compensating balance against a short-term bank loan. The compensating balance is legally restricted as to withdrawal. Accounts receivable The accounts receivable consists of the following: Trade accounts receivable P 650,000 Allowance for uncollectible accounts (20,000) Claim against shipper for goods lost in transit 30,000 Selling price of unsold goods sent by Masha on consignment at 130% of cost (included in 260,000 Masha's ending inventory at cost) Security deposit on lease of warehouse used for storing some inventories 300,000 gota! 1,220,000 Inventory A physical count of inventory at December 31, 2019 revealed that Masha had inventory on hand at that date with a cost of P441,000. The annual audit identified that the fc lowing items were excluded from this amount and the related transactions were not recorded: + Merchandise of P61,000 is held by Masha on consignment. The consignor is Meta Company. * Merchandise costing P38,000 was shipped by Masha FOB destination to a customer on December 31, 2019. The customer was expected to receive the goods on January 6, 2020. * Merchandise costing P46,000 was shipped by Masha ree e shipping point to a customer on December 29, 2019. Voce 33 aaaati fe: SETB Senones was scheduled to receive the godds on January 2, * Merchandise costing P83,000 shipped by a vendor FOB destination on December 31, 2019 was received by Masha on January 4, 2020. ‘* Merchandise costing P51,000 purchased FOB shipping point was shipped by the supplier on December 31, 2019 and received by Masha on January 5, 2020. QUESTIONS: Based on the above and the result of the audit, determine the. adjusted amount of the following: : } 61. Cash a. P921,000 % c. P584,000 ‘b. P521,000 d. P506,000 z its recetvable oo 7630,000 <. 767,800 b. P782,800 - d. P754,000 4 bles, net 63. Baer or receival Paneeeo cnn b. 812,800 4. P784,000 Paadpvemoy 451,000 « d b 740,000 d. P530,000 65. Currents assets <. 'p2'a8s,00 a. 2,361,000 Se oe rand b. P2,498,800 PROBLEM NO. 7 X.Borg Corporation, 2 tion on October 1, xiborg has started the fixed-asset presented below. teel products, began er of Sting department. of tion schedule a manufactur 2017. The accoun' and deprecia Ati. FinPB10.19 Bana oF Auditing \ X,BORG CORPORATION Fixed Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2018, and September 30-2019 cxpence Year Ended eu 30 ex hea om. Uein acaes Cale cost, Sage Mithad Yeas 2018208 Shan torvia 3 paoodd sean: “My PunasO | 7 bran 30/1/18 y mobe suathe 2 Bulag 101 money tote 10/118 2 WA OMA NR WR uiding 8 Under P320,000 sein 300 é consis "to aate i on onaes 10/27 23,000 a to37 2 > 6,000 ati 22 5 dots Machine 8 10/1/18 2 sie 20 ? WA Not applicable ‘You have been asked to assist in completing this schedule. In addition in ascertaining that the data already on the schedule are correct, you have obtained the following information from the Company's records and personnel: a.Land A and Building A were acquired from a predecessor corporation. X.Borg paid P820,000 for the land and building together. At the time of acquisition, the land had an appraised value of P90,000, and the building had an appraised value of P810,000. b. Land B was acquired on October 2, 2017, in exchange for 2,500 newly issued ordinary shares of X.Borg. At the date of acquisition, the shares had a par value of P5 per share and a fair value of P30 per share. During October 2017, X.Borg paid P16,000 to demolish an existing building on this land so it Page 25o728——(enurte.com.oh ‘AUD.FinPBI0.19Auditing ©. Construction of bi October 1, 2018, P320,000 of the estimated total and occupied by July 2020. d. Certain equipment was donated university. An independent app: donated placed the fair val at P3,000. €. Machinery A’s tot: tal cost of P: expense of P600 and normal roars was sold on February 1, 2019 f. On feabosesber 1 2018, Machinery B was acquired with a down Payment of P9,740 and the remaining payments to be made in 11 annual installments of 6,000 each beginning October 1 . The prevailing interest rate was 8%. The following data were abstracted from the present-value tables (rounded): Present value of P1 at 8% for 1f years Present value of an ordinary annuity of Pi at 8% for 11 years Present value of an annuity due of P1 at 8% for 11 years QUESTIONS: Based on the above and the result of your audit, answer following: (_ 66. The cost of Building A is By September 30, 2019, 450,000. It is estimated that the bi einai to the corporatio n by ak nt appraisal of the equipment ancy 10,000 and the salvage value : ue 9 doce installation 14, P6, 900. Salvage value is estimated at 6,000." Machinery’, 0.429 7.139 7.710 a. P82,000 c. P738,000 b. P820,000 a? 0 67. The cost of Machine B is a. P46,260 c. P48,574 b. P48,722 d, P52,000 Page 26 of 28 sas , X.Borg ha 5 ution 5 Pad will be completed “Aub FinPBx0.19° Auditing 68. The total depreciati SeTB ion expense for the year ended September Bea O37 <. P51,875 b. P33,208 d. 32,826 69, The most signific the equipment a b. c, 70. Analytical estimation of depreciation important audit test because it does w a b. c d Fae ene COMB ant audit step in substantiating additions to yt account balance is ‘Comparison to prior year's acquisitions, Review of transactions near the end of the reporting period for proper period cutoff. Calculation of ratio of depreciation exper equipment cost. Examination of vendors! invoices and receiving reports for current year’s acquisitions. nse to gross office by the auditor is an hich of the following? It yields statistical precision in sampling. It signals which additions will be vouched. It gives the auditor an indication of the impaired balances existing in financial statements. It is a good starting point fi procedures. or determining additional