CPA REVIEW SCHOOL OF THE PHILIPPINES AP 94 PW SOL
Manila
AUDITING PROBLEMS CPA Review
SITUATIONAL
Situation 1 – DIONISIO CORP.
Current account at P
Treasury bills
Payroll account 390,000
Traveler’s check 21,000
Money order 12,900
Petty cash fund
Total cash and cash equivalents P861,900
Answer: D
Situation 2 – SAMANTHA, INC.
1. Currency P1,650
Petty cash vouchers
Replenishment check 7,200
Employee’s NSF check 1,000
Petty cash accounted for 13,810
Petty cash fund per ledger (custodian’s accountability) 16,000
Petty cash shortage P2,190
Answer: B
2. P
Adjusted petty cash balance P8,850
Answer: D
Situation 3 – DION COMPANY
1.
Outstanding checks, June 30 P 17,420
Add: Checks issued in July
Total 246,130
Less: Checks paid by bank in July (P236,150 – P3,960 erroneous check
charged by bank) 232,190
Outstanding checks, July 31 P 13,940
Answer: C
Alternative computation:
Checks outstanding on June 30 that did not clear in July
( ) P 500
Checks issued in July that did not clear in July ( ) 13,440
Outstanding checks, July 31 P13,940
Page 1 of 4 Pages
CPAR - MANILA AP 94 PW SOL
2.
Deposits in transit, June 30 P 6,000
Add: July deposits per cash receipts journal 254,560
Total 260,560
Less: Deposits credited by bank in July 250,560
Deposits in transit, July 31 P10,000
Answer: B
3.
Book Bank
Unadjusted balances P82,560 P 6,960
Outstanding checks (see no. 1)
Deposits in transit (see no. 2)
Bank service charge
Unrecorded check
Check erroneously charged to Dion
NSF check
Note payment ( )
Adjusted balances P 6,980 P 6,980
Answer: A
Situation 4 – LAGUNDI COMPANY
1. No effect on total assets and net income for 2023. The entry to record the write off is:
Allowance for doubtful accounts 20,000
Accounts receivable 20,000
Answer: C
2. Credit sales ( ) P
Less: Sales discounts P250,000
Sales returns and allowances 350,000 600,000
Net sales
Multiply by bad debt rate x 1.5%
Doubtful accounts expense P
Answer:
3. Doubtful accounts expense
Allowance for doubtful accounts
Accounts
Age Receivable Balance Rate Amount
Less than 60 days P780,000 1% P 7,800
61-90 days 230,000 5% 11,500
91-120 days 420,000 15% 63,000
Over 120 days 50,000 40% 20,000
Required allowance 102,300
Allowance balance ( ) ( )
Adjustment – increase in allowance P
Answer:
4. Accounts receivable P1,480,000
Less: Allowance for doubtful accounts (see no. 3)
Net realizable value, Dec. 31, 2023 P
Answer:
Page 2 of 4 Pages
CPAR - MANILA AP 94 PW SOL
5. Assessing the allowance for doubtful accounts for reasonableness.
Answer: D
Situation 5 – PIG, INC.
Inventory quantity, Nov. 30 145,730
Add: December purchases:
PO Date
12.05.23 Purchased under FOB Destination
term; received 12.22.23 3,600
12.18.23 Purchased under FOB Shipping
Point term; shipped 12.29.23 8,000 11,600
Units available for sale 157,330
Less: Units sold in December:
Consignment sales 15,200
Other sales (138,630 – 40,000) 98,630 113,830
Inventory quantity, Dec. 31 43,500
1. Goods purchased in December 11,600
Answer: A
2. Goods sold in December 113,830
Answer: B
3. Inventory quantity, December 31 43,500
Answer: C
4. Purchased and received before year-end was recorded.
Answer: C
5. Sale in the current period.
Answer: C
Situation 6 – SUPERPOWER COMPANY
Patent P870,000
Less: Amortization ( ) 108,750 P 761,250
Goodwill 720,000
Franchise P900,000
Less: Amortization ( ) 45,000 855,000
Copyright P312,000
Less: Amortization ( ) 26,000 286,000
Total carrying value, Dec. 31, 2023 P2,622,250
Answer: B
Situation 7 – DADANG Company
1. Accounts payable per book P523,100
Unreleased checks
Understatement of book disbursement
( )
Unrecorded purchase
Accrued expenses
Page 3 of 4 Pages
CPAR - MANILA AP 94 PW SOL
Cash advance from the company president
Advance payment for goods ordered
erroneously debited to Accounts payable
Adjusted balance P
2. C Accrued expenses per book P 63,100
Accrued expenses erroneously included in
Accounts payable
Various accruals ( )
Adjusted accrued expenses P
Situation 8 – DOMINICA CORPORATION
2021 2022 2023
Reported net income P127,000 P150,000 P128,500
a. 2022 ending inventory understated --
2023 ending inventory overstated -- --
b. 2024 purchase recorded in 2023 -- --
c. Unrecorded sales on account:
2021 --
2022 --
2023 -- --
d. Unrecorded accrued salaries:
2021 --
2022 --
e. Stock dividend charged to expense -- --
f. Insurance premium expensed --
g. Deferred gain on bond retirement -- --
Amortization of deferred gain -- --
Adjusted net income P121,000 P179,000 P129,600
1. C 2. D 3. A 4. A
5. B Retained earnings 16,000
Share premium 3,000
Miscellaneous expenses 13,000
---END---
Page 4 of 4 Pages
