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Compiled from REO

AUDITING (AUD)
OCTOBER 2024 BATCH

REO CPA REVIEW

AUDITING
FIRST PREBOARDS – OCTOBER 2024 BATCH

1. Statement 1: Only Certified Public Accountants are allowed to teach technically related subjects in the BSA
program.
Statement 2: Practice in the academe shall constitute in a person in an educational institution which involve
technically related subjects.
A. True, True
B. False, True
C. True, False
D. False, False

2. Brando, CPA was appointed as the BOA Chairman in 2024. After serving 1 complete term, in what year is he
eligible for reappointment?
A. 2027
B. 2028
C. 2030
D. He is no longer eligible for reappointment.

3. The following statements relate to the rating in the CPA exams. Identify the correct statement.
A. A candidate must have a general weighted average of at least 75% with no grades lower than 75% in any
given subject in order to pass the CPA exams.
B. In the event a candidate obtains a rating of 75% and above in at least a majority of the subjects, he/she shall
receive conditional credit for the subjects failed.
C. Any candidate who fails in 2 complete CPA Board Exams shall be disqualified from taking another set of
examination unless he or she submits evidence to the satisfaction of the Board he/she enrolled in and
completed at least 24 units of subjects given in the licensure examination within two years from the last
examination taken.
D. The Board shall submit to the PRC the ratings obtained by each candidate within ten (10) calendar days after
the examination.

4. Unless otherwise exempted, registered CPAs in the practice of accountancy who have not completed the CPE
requirements shall
A. Be dropped from the roster of CPAs.
B. Not be allowed to renew their professional licenses.
C. Submit a letter addressed to the Board indicating the reasons for not complying with the CPE requirements.
D. Present evidence to the satisfaction of the Board that they have the necessary knowledge, skills and
experience to discharge their professional responsibility.

5. Statement 1: A certificate of registration shall be issued to certified public accountants in public practice only
upon showing that such registrant has acquired a minimum of three (3) years meaningful experience.
Statement 2: The Securities and Exchange Commission shall not register any corporation organized for the practice
of public accountancy.
A. True, True
B. False, True
C. True, False
D. False, False

6. Which of the following is correct regarding the Quality Review Committee?

A. Conduct quality review on applicants for registration to practice private accountancy
B. Recommend the revocation of the certificate of registration and PIC of applicants who has not observed the
quality control measures
C. BOA may conduct the required quality review.
A. I and II
B. I and III
C. II and III
D. I, II and III
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7. A violation of the profession’s ethical standards most likely would have occurred
when a CPA
A. Recommended a controller’s position description and candidate specifications to
an audit client.
B. Issued an unqualified opinion on the 2024 financial statements when fees for the 2023 audit were unpaid.
C. Purchased a CPA firm’s practice of monthly write-ups for a percentage of fees to be received over a three-
year period.
D. Made arrangements with a financial institution to collect notes issued by a client
in payment of fees due for the current year’s audit.

8. Which of the following statements concerning a CPA’s disclosure of confidential client

information is ordinarily correct?
A. Disclosure should not be made even if such disclosure will protect the CPA’s
professional interests in legal proceedings.
B. Disclosure should be made only if there is a legal or professional duty to make the disclosure.
C. Disclosure may be made to any government agency without subpoena.
D. Disclosure may be made to any party on consent of the client.

9. Which of the following is a “self-review” threat to member independence?

A. An engagement team member has a spouse that serves as CFO of the attest client.
B. A second partner review is required on all attest engagements.
C. An engagement team member prepares invoices for the attest client.
D. An engagement team member has a direct financial interest in the attest client.

10. Statement 1: A CPA may receive a commission for recommending a particular computer system to an audit
client.
Statement 2: CPAs can advertise the fees only for their non-attest services.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

11. Below statements are descriptions of people who can have a participation in an assurance engagement. Which of
these appropriately describe an engagement partner?
A. A professional with the necessary knowledge, skills, experience and authority to review, in an objective
manner, the relevant work performed or service provided. Such an individual might be a professional
accountant.
B. The individual responsible for the engagement quality control review, and other audit partners, if any, on the
engagement team who make key decisions or judgments on significant matters with respect to the audit of the
financial statements on which the firm will express an opinion. Depending upon the circumstances and the
role of the individuals on the audit, “other audit partners” might include, for example, audit partners
responsible for significant subsidiaries or divisions.
C. An individual (who is not a partner or a member of the professional staff, including temporary staff, of the firm or a
network firm) or organization possessing skills, knowledge and experience in a field other than accounting or
auditing, whose work in that field is used to assist the professional accountant in obtaining sufficient appropriate
evidence.
D. The partner or other person in the firm who is responsible for the engagement and its performance, and for the
report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a
professional, legal or regulatory body.

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12. Which of the following is/are true?

Statement 1: If the professional accountant identifies or suspects that non-compliance has occurred or might occur,
the accountant shall discuss the matter with the appropriate level of management and, where appropriate, those
charged with governance. Statement 2: If the professional accountant believes that management is involved in
the non-compliance or suspected non-compliance, the accountant shall discuss the matter with an independent
advisor on a confidential basis.
A. Statement 1 only
B. Statement 2 only
C. Both statements are correct
D. Both statements are incorrect

13. Which of the following is always present in an attestation engagement?

A. Subject matter
B. An examination report
C. Assertion about the subject matter
D. Generally accepted assurance principles

14. Which of the following is/are true?

Statement 1: Responsible parties and intended users may be from the same entity. Statement 2: Responsible
parties and intended users may be from the different entities.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

15. Evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least
persuasive type of evidence?
A. Documents mailed by outsiders to the practitioner.
B. Correspondence between the practitioner and vendors.
C. Sales invoices inspected by the practitioner.
D. Computations made by the practitioner.

16. Which of the following is not an example of the application of professional skepticism?
A. Designing additional auditing procedures to obtain more reliable evidence in support of a particular
financial statement assertion.
B. Inquiring of prior year engagement personnel regarding their assessment of management's honesty
and integrity.
C. Obtaining corroboration of management's explanations through consultation with a specialist.
D. Using third party confirmations to provide support for management's
representations.

17. Usually, an operational audit is performed

A. By independent external auditors.
B. By a team consisting of an equal number of external and internal auditors.
C. Only when an operating division is experiencing declines in productivity or profitability.
D. By internal auditors at the request of top management or the board of directors.

18. The "hallmark" of auditing is

A. Available audit technology.
B. Generally accepted auditing standards.
C. Professional judgment.
D. Materiality and audit risk.

19. Who ultimately determines the scope of the audit?

A. The auditor
B. The client
C. Both the auditor and the client shall agree on the procedures to be performed by the auditor.
D. Neither a nor b since procedures are already enumerated in the Philippine Standards on Auditing

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20. One reason that an auditor only obtains reasonable, and not absolute, assurance that financial statements are
free from material misstatement is
A. Comprehensive basis reporting
B. Professional skepticism
C. Material misstatements
D. Employee collusion

21. Which one of the following is not part of the attest process?
A. Providing the accuracy of the books and records
B. Gathering evidence about assertions
C. Evaluating evidence against objective criteria
D. Communicating the conclusions reached

22. A CPA who has never audited a commercial bank

A. May not accept such an engagement.
B. May accept the engagement because training as a CPA transcends unique industry characteristics.
C. May accept the engagement only if the accounting firm specializes in the audit of commercial banks.
D. May accept the engagement after attaining a suitable level of understanding of the transactions and accounting
practices unique to commercial banking.

23. A proposed auditor is required to attempt communication with the previous auditor prior to:
A. Accepting the engagement.
B. Performing test of controls.
C. Testing beginning balances for the current year.
D. Making a proposal for the audit engagement.

24. An auditor's engagement letter most likely would include a statement regarding:
A. Management's responsibility to provide certain written representations to the auditor.
B. Conditions under which the auditor may modify the preliminary judgment about materiality.
C. Internal control activities that would reduce the auditor's assessment of risk.
D. Materiality matters that could modify the auditor's preliminary assessment of fraud risk.

25. Audit plans are designed so that

A. The auditor’s conclusions are supported by audit evidence gathered
B. Major audit procedures can be performed as at interim work
C. Inherent risk is assessed at a sufficiently low level
D. Management letter points can be shared to the client

26. In what order should the following steps occur?

I. Assess client business risk
II. Understand the client’s business and industry
III. Perform preliminary analytical procedures
IV. Assess acceptable audit risk
A. IV, II, III, I
B. II, I, IV, III
C. II, IV, I, III
D. IV, III, II, I

27. To obtain an understanding of a continuing client's business in planning an audit, an auditor most likely would:
A. Perform tests of details of transactions and balances.
B. Review prior-year audit documentation and the permanent file for the client.
C. Read specialized industry journals.
D. Reevaluate the client's internal control environment.

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28. In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?
A. The internal audit department's objectivity in reporting a material misstatement of financial statement
assertion it detects to the audit committee.
B. The risk that the internal control system will not detect a material misstatement of financial statement
assertion.
C. The risk that the audit procedures implemented will not detect a material misstatement of a financial
statement assertion.
D. The susceptibility of a financial statement assertion to a material misstatement assuming there are no related
controls.

29. Which of the following components of audit risk may be assessed in qualitative terms?
I. Inherent risk
II. Control risk
III. Detection risk
A. I and II only
B. I and III only
C. II and III only
D. I, II and III

30. Which of the following courses of action is the most appropriate if an auditor concludes that there is a high
risk of material misstatement?
A. Increase of tests of controls
B. Select more effective substantive tests
C. Use smaller, rather than larger, sample sizes
D. Perform substantive tests as of an interim date

31. Which of the following would an auditor most likely use in determining the auditor's preliminary judgment about
materiality?
A. The results of the initial assessment of control risk.
B. The anticipated sample size for planned substantive tests.
C. The entity's financial statements of the prior year.
D. The assertions that are embodied in the financial statements.

32. Which of the following is true about the auditors' consideration of internal control in a financial statement audit?
A. The auditors must assess control risk at a level lower than the maximum.
B. The auditors must prepare a flowchart description of internal control for their working papers.
C. The auditors must obtain an understanding of the steps in processing major types of transactions.
D. The auditors must perform tests of controls.

33. In understanding the entity’s internal control, the auditor is required to obtain
knowledge about the
A. Design of the controls
B. Effectiveness of controls implemented
C. Consistency with which controls are applied
D. Controls pertaining to each class of transaction

34. Which of the following statements does not properly describe the reason why control risk cannot be reduced to
zero?
A. Management may override controls however effective the controls are implemented at the lower level.
B. The cost of designing and implementing controls should not exceed their benefits.
C. People and personnel subject of the controls are prone to errors and mistakes in judgment.
D. Some accounts and transactions are more susceptible to misstatement (whether due to fraud or error) than
other accounts and balances.

35. Which of the following is most likely to be considered a risk assessment procedure relating to internal control?
A. Confirm accounts receivable.
B. Perform a test of a control relating to payroll.
C. Take test counts of the year-end inventory.
D. Trace a transaction through the information system relevant to financial reporting.

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36. Statement 1: The auditors' tests of controls are designed to substantiate the fairness of specific financial statement
accounts.
Statement 2: At least a portion of the auditors' consideration of internal control usually is performed at an interim
date rather than at the balance sheet date.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

37. Statement 1: The relatively low number of types of transactions incurred by small firms makes the segregation of
duties impossible.
Statement 2: In a financial statement audit, CPAs are required to assess the operating effectiveness of most
significant accounting-oriented controls.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

38. System characteristics that may result from the nature of IT processing include, except
A. Absence of input documents.
B. Lack of visible transaction trail.
C. Lack of visible output.
D. Difficulty of access to data and computer programs.

39. Statement 1: Auditors usually begin their consideration of IT systems with tests of application controls.
Statement 2: Generalized audit software may be used for substantive tests or for tests of controls.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

40. Which of the following is least likely to be a general control over computer activities?
A. Procedures for developing new programs and systems.
B. Requirements for system documentation.
C. A change request log.
D. A control total.

41. Which of the following is least likely to be tested with generalized audit software?
A. An aging of accounts receivable.
B. A schedule of inventory.
C. A depreciation schedule
D. A computer-operations manual.

42. Evaluate the following clients as the approach you will take in understanding (or testing) the system:
I. Airline company; system is always online
II. Law firm; processing is by batch
A. white box; white box
B. black box; white box
C. black box; black box
D. white box; black box

43. The audit procedure which is least useful in gathering evidence on significant computer processes is:
A. Documentation.
B. Observation.
C. Test decks.
D. Generalized audit software.

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44. In describing the cycle approach to segmenting an audit, which of the following statements is not true?
A. All general ledger accounts and journals are included at least once.
B. Some journals and general ledger accounts are included in more than one cycle.
C. The “capital acquisition and repayment” cycle is closely related to the “acquisition of goods and
services and payment” cycle.
D. The “inventory and warehousing” cycle may be audited at any time during the
engagement since it is unrelated to the other cycles.

45. After the auditor has prepared a flowchart of internal control for sales and cash receipts transactions and
evaluated the design of the system, the auditor would perform tests of controls on all control procedures
A. Documented in the flowchart.
B. Considered to be deficiencies that might allow errors to enter the accounting system.
C. Considered to be strengths that the auditor plans to rely on in assessing control risk.
D. That would aid in preventing irregularities.

46. Which of the following best represents a key control for ensuring sales are properly authorized when assessing
control risks for sales?
A. The separation of duties between the billing department and the cash receipts approval department.
B. The use of an approved price list to determine unit selling price.
C. Copies of approved sales orders are sent to the shipping, billing, and accounting departments.
D. Sales orders are sent to the credit department for approval.

47. Tracing copies of computer-prepared sales invoices to copies of the corresponding computer-prepared shipping
documents provides evidence that:
A. Shipments to customers were properly billed.
B. Entries in the accounts receivable subsidiary ledger were for sales actually shipped.
C. Sales billed to customers were actually shipped.
D. No duplicate shipments to customers were made.

48. The primary audit objective regarding the purchasing of materials by the client is to
A. Ascertain that materials paid for are on hand.
B. Observe the annual physical count.
C. Investigate the recording of unusual transactions regarding materials.
D. Determine the reliability of financial reporting by the purchasing function.

49. What is the reason for ensuring that every copy of a vendor's invoice has a receiving report?
A. To ascertain that merchandise billed by the vendor was received by the company.
B. To ascertain that merchandise received by the company was billed by the vendor.
C. To ascertain that the invoice was correctly prepared.
D. To ascertain that a check was prepared for every invoice.

50. Statement 1: The department approving a sales transaction should be the shipping department.
Statement 2: Accounts receivable that are written-off should not be turned over to a collection agency.
Statement 3: An aged trial balance of accounts receivable may provide evidence on the adequacy of the allowance
for uncollectible accounts.
A. Only one statement is correct
B. Only two statements are correct
C. All statements are correct
D. All statements are incorrect

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PROBLEM NO. 1
XYZ Co. has the following information on December 31, 2022 before any year-end adjustments.

Net credit sales ₱8,000,000

Accounts receivable, December 31 1,240,000
Allowance for doubtful accounts, Dec. 31
(before any necessary year-end adjustments) 68,000
Percentage of credit sales 2%

The aging of receivables is shown below:

Receivable %
Days outstanding balances uncollectible
0 – 60 480,000 1%
61 – 120 360,000 2%
Over 120 400,000 6%
Total accounts
receivables 1,240,000

Additional information:
 XYZ Co. uses the percentage of credit sales in determining bad debts in monthly financial reports and the aging
of receivables for its annual financial statements.
 Accounts written-off during the year amounted to ₱152,000 and accounts recovered amounted to ₱36,000.
 As of December 31, XYZ Co. determined that a ₱90,000 accounts receivable from a certain customer included in
the “61-120 days outstanding” group is 95% collectible and a ₱40,000 account included in the “Over 120 days
outstanding” group is worthless and needs to be written-off.

51. How much is the required balance of the allowance for doubtful accounts on December 31, 2022?
a. 36,000 b. 76,000 c. 36,300 d. 44,000

52. How much is the adjusted bad debt expense to be reported in the year-end financial statements?
a. 128,000 b. 168,300 c. 128,300 d. 168,000

53. The year-end adjusting entry would include

a. A debit to doubtful accounts expense for ₱8,000
b. A credit to doubtful accounts expense for ₱8,000.
c. A debit to doubtful accounts expense for ₱8,300.
d. A credit to doubtful accounts expense for ₱8,300.

54. Which of the following is the best audit procedure to detect recorded sale with no shipment?
a. Trace from sales journal entry to shipping document.
b. Check cancellation of shipping documentation.
c. Review segregation of duties and ensure the person recording sales should not authorize shipments.
d. Trace from shipping documents to recorded sales transaction.

55. The following are the auditor’s principal objectives in the audit of revenues, except
a. To determine whether all cash owned by the entity at the balance sheet date is included on the balance
sheet.
b. To determine whether earned revenue has been recorded and recorded revenue has been earned.
c. To determine whether revenues are reported in the income statement at the appropriate amounts.
d. To determine whether revenues are properly classified, described, and disclosed in the financial
statements, including notes, in conformity with GAAP.

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56. Auditors are often concerned with the possibility of overstatement of sales and
receivables. However, management may also have reasons for understating these balances. Which of the
following would explain understatement of sales and receivables?
I. To avoid paying taxes.
II. To window dress the financial statements.
III. To meet budgets and forecasts.

a. I only.
b. II only.
c. I and III only.
d. I, II, and III.

57. An auditor most likely would review a client’s periodic accounting for the numerical sequence of shipping
documents and sales invoices to support management’s financial statement assertion of
a. Existence
b. Rights and obligations.
c. Completeness.
d. Valuation and allocation.

58. The auditor finds a situation in which one person has the ability to collect receivables, make deposits, issue credit
memos, and record receipt of payments. The auditor suspects the individual may be stealing cash receipts. Which
of the following audit procedures would be most effective in discovering fraud in this scenario?
A. Perform detailed review of debits to sales discounts, sales returns and allowances, or other debit
accounts, excluding cash posted to the cash receipts journal.
B. Take a sample of bank deposits and trace the detail in each bank deposit back to the entry in the cash
receipts journal.
C. Send negative confirmations to all outstanding accounts receivable customers.
D. Send positive confirmations to a random selection of customers.

PROBLEM NO. 2
The following accounts were included in the unadjusted trial balance of PERSISTENT Company as of December
31, 2006:

Cash P 481,600
Accounts receivable 1,127,000
Inventory 3,025,000
Accounts payable 2,100,500
Accrued expenses 215,000

During your audit, you noted that PERSISTENT Company held its cash books open after year-end. In
addition, your audit revealed the following:

1. Receipts for January 2007 of P327,300 were recorded in the December 2006 cash receipts book. The
receipts of P180,050 represent cash sales and P147,250 represent collections from customers, net of 5%
cash discounts.
2. Accounts payable of P186,200 was paid in January 2007. The payments, on which discounts of P6,200 were
taken, were included in the December 2006 check register.
3. Merchandise inventory is valued at P3,025,000 prior to any adjustments. The following information has been
found relating to certain inventory transactions.
a. Goods valued at P137,500 are on consignment with a customer. These goods are not included in
the inventory figure.
b. Goods costing P108,750 were received from a vendor on January 4, 2007. The related invoice was
received and recorded on January 6, 2007. The goods were shipped on December 31, 2006, terms
FOB destination.
c. Goods costing P318,750 were shipped on December 31, 2006, and were delivered to the customer on
January 3, 2007. The terms of the invoice were FOB shipping point. The goods were included in the
2006 ending inventory even though the sale was recorded in 2006.
d. A P91,000 shipment of goods to a customer on December 30, terms FOB destination are not included
in the year-end inventory. The goods cost P65,000 and were delivered to the customer on January 3,
2007. The sale was properly recorded in 2007.

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e. The invoices for goods costing P87,500 was received and recorded as a purchase
on December 31, 2006. The related goods, shipped FOB destination were
received on January 4, 2007, and thus were not included in the physical inventory.
f. Goods valued at P306,400 are on consignment from a vendor. These goods are not included in the
physical inventory.

QUESTIONS:
Based on the above and the result of your audit, determine the adjusted balances of the following as of December
31, 2006:

59. Cash
a. P481,600 c. P334,300
b. P340,500 d. P346,700

60. Accounts receivable

a. P1,454,300 c. P1,127,000
b. P1,282,000 d. P1,274,250

61. Inventory
a. P3,017,500 c. P2,908,250
b. P3,040,000 d. P2,505,000

PROBLEM NO. 3
Use the following information for the next three questions:
On January 1, 2023, Sheila Co. purchased the following marketable securities to be held for trading. Transaction costs
are negligible.
Cost
May Co. preference shares ₱200,000
Pearl Co. ordinary shares 160,000
Shane Co. bonds 120,000
Totals ₱480,000

On December 31, 2023, Sheila’s investment portfolio has the following fair values
Fair value – 12/31/23
May Co. preference shares ₱160,000
Pearl Co. ordinary shares 60,000
Shane Co. bonds 140,000
Totals ₱360,000

On December 31, 2024, Sheila’s investment portfolio has the following fair values
Fair value – 12/31/24
May Co. preference shares ₱220,000
Pearl Co. ordinary shares 80,000
Shane Co. bonds 120,000
Totals ₱420,000

On February 2, 2025, all of the May Co. preference shares were sold for ₱160,000, net
of transaction costs.

62. How much is the unrealized gain (loss) recognized on December 31, 2023?
a. 120,000 b. (120,000) c. (140,000) d. 140,000

63. How much is the unrealized gain (loss) recognized on December 31, 2024?
a. 60,000 b. (60,000) c. 120,000 d. (120,000)

64. To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor
most likely would
a. Inspect the stock certificates evidencing the investment.
b. Examine the audited financial statements of the investee company.
c. Review the broker’s advice or cancelled checks for the investment’s acquisition.
d. Obtain market quotation from financial newspapers or periodicals.

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11. An auditor compares annual revenues and expenses with similar amounts from the prior
year and investigates all changes exceeding 10%. This procedure most likely could
indicate that
a. Fourth quarter payroll taxes were properly accrued and recorded, but were not paid until early in
the subsequent year.
b. Unrealized gains from increases in the value of FVTOCI securities were recorded in the income
account for FVTPL securities.
c. The annual provision for uncollectible accounts expense was inadequate because of worsening
economic conditions.
d. Notice of an increase in property tax rates was received by management, but was not recorded until
early in the subsequent year.

PROBLEM NO. 4
You are engaged in the first-time audit of I WON’T GIVE UP Co as of December 31, 2025. I WON’T GIVE UP Co
reported the following net incomes:
2023 1,500,000
2024 2,200,000
2025 2,800,000
An audit of the records disclosed the following:
a. Purchases account was debited in 2025 instead of office supplies
5,000
b. The physical inventory on December 31, 2023
was overstated 10,000
c. The physical inventory on December 31, 2024
was understated 15,000
d. Advances to supplier were recorded as purchases
but the merchandise was received in the following year: 2023
30,000
2024 40,000
e. Advances from customers recorded as sales but the goods were delivered
in the following year:
2023 25,000
2024 50,000
f. Insurance premium for three years paid in 2023 was charged entirely to
expense in 2023 15,000

g. On January 1, 2024, an equipment costing ₱40,000 was sold for ₱20,000.

At the date of sale, the equipment had an accumulated depreciation of ₱25,000.
The cash received
was recorded as other income in 2024.

66. The adjusted net income in 2024 is

a. 1,970,000 c. 2,190,000
b. 1,990,000 d.1,940,000

67. The adjusted net income in 2025 is

a. 2,790,000 c. 2,775,000
b. 2,870,000 d. 2,795,000

PROBLEM NO. 5
68. Wise Company provided the following information for the current year: Cash sales
Gross 2,000,000
Returns and allowances 100,000
Credit sales
Gross 3,000,000
Discounts 150,000
On January 1, customers owed 1,000,000. On December 31, customers owed 750,000.
The entity used the direct write off method for bad debts. No bad debts were recorded in the current year.

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Under the cash basis, what amount of revenue should be reported for the current year?
a. 5,000,000 b. 4,750,000 c. 4,250,000 d. 1,900,000

PROBLEM NO. 6
69. Queen company provided the following data for the current year: Sales 10,000,000
Cost of goods sold 5,300,000
Operating expenses 3,800,000

December 31 January 1
Prepaid operating expenses 1,000,000 700,000
Accounts payable 1,350,000 1,200,000
Inventory 2,500,000 2,100,000
Accounts Receivable 1,400,000 1,375,000
Under the cash basis, what amount should be reported as purchases for the current year?
a. 5,550,000 b. 5,700,000 c. 5,850,000 d. 5,150,000

70. When an item of revenue is collected and recorded in advance, it is normally called
a. Accrued revenue
b. Prepaid revenue
c. Unearned revenue
d. Cash

“For with Him, nothing shall be impossible.”

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REO.CPA.ACADEMICS.F1.01.00