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‘Auditing Problems = cr
so SETA
INSTRUCTIONS:
Select the. best
following, iauesticns: answer for each of the
MUST be attempted. Mark only one answer for each frenent
the answer sheet provided. Strictly NO ERASURES ALLOWED
Frasures will render your examination answer sheet INVALID,
Use PENCIL NO. 2 only. GOODLUCKIG
PROBLEM NO. 1
Excel, Inc. is an importer and whol
Its merchandise is
warehoused unt
lesaler of cellphone accessories,
Purchased from @ number of suppliers and is
sold to customers.
In conducting your audit of Excel's finan
financial statements for the
year ended December 31, 2014, you determined that the internal
control system is functioning effectively. You observed the
physical count of inventory on November 30, 2014.
The following information were obtained from Excel's accounting
‘Sales for 11 months ended November 30 3,400,000
Sales for the year ended December 31 3,840,000
Purchases for 11 months ended Nov. 30 2,700,000
Purchases for the year ended Dec. 31 3,200,000
Inventory, January 1 350,000
Inventory, Nov. 30 (per physical count) 380,000
Your audit disclosed the following information:
a) Shipments received in unsalable condition and
‘excluded from physical inventory. The returns
were not recorded because no credit memos
were received from vendors:
Total at November 30 P 4,000
Total at December 31 6,000
(including the November 30 unrecorded
returns)
ST RE OpenPBS. Ta—
Page 7 oF 20 a
‘Auditing Problems mera:
b) Deposit made with vendor and charged to
Purchases in. October. The goods were shipped
in January 2015.
) Deposit made with vendor and charged to
Purchases in November. The goods were
shipped FOB destination on November 29 and
were included in physical inventory as goods in
transit.
4) Shipments received in November and included in
the physical count at November 30 but
recorded as December purchases:
fe) Due to the carelessness of the receiving
department, a December shipment was
damaged by rain. These goods were later sold
at cost in December. |
8,000
22,000
30,000
40,000
QUESTIONS:
Based on the above and the result of your audit, answer the
following: f
1,-#@justed net purchases ;
on Up to November 30: 2,666,000;
Up to December 31: P3,190,000
700,000; \
(696,000; ~ i
|. Up to November
+ Up to December 31: P3,184,000
for 11 months ended November 30,2014
2. Cost of goods sold for ded November 3
2,688,000
@ 2,666,000 4. P2,692,000
3, "Gross profit ratio for, 14 months ended November 30, 2014
o* @® 21.58% 21.47%
20.94% 4. 20.82%
sary wana a = Bi GpenaPRS Ta
Fore S d Auditing Problems
Pacers ~
: FO8s profit for the month of December 2014
a. 92,136 -€" P83,760
b. P91,236 d. P88,000
A Estimated inventory at December 31,2014
a. P491,760 & Pa90,000
b. 456,000 dpa
PROBLEM NO, 2
\tory of the company
Only“ merchandis.
company to customers up to Deca ae oes
and including December
have been eliminated from. inventory. the inverter se
determined by physical inventory count has been recorded on the
books by the company’s controller. No perpetual inventory
Fecords are maintained. All sales are made on an FOB shipping
point basis. You are to assume that all
been correctly recorded. ‘The inventory w:
cost of sales method,
jas recorded through the
The following lists of sales invoices are entered in the sales books
for the month of December 2014 and January 2015, respectively.
Purchase invoices have -
|
|
‘Austing Probes SETA
JANUARY 2015 f
fy 300,000 Dec. 31 200,000 . Dec. 30, 2014
g) 200,000 Jan, 02 115,000 Jan. 02,2015 ~
h) Jan. 03 475,000 Dec. 31, 2014° °c,
QUESTIONS:
Based on the above and the result of your audit, answer the
following:
by
6, -Salés for the year ended December 31, 2014 ts misstated
=a, P100,000 over °° (f, °100,000 under
b. 200,000 over (A) °200,000 under
it for the year ended December 31, 2014 is misstated by
A 95,000 ever . P_ 25,000 under
“p< P195,000 over d. P380,000 under
isstated by
8,.A¥fventory as of December 31, 2014 is misst
oa, 180,000 under |! M
‘By P95.6 milion ha
14. Total depreciation
a. P16.6
PROBLEM NO. 4
Calamba Corporation owns the following~properties at 1 January
2014:
Property A
office building used by Calamba for administrative purpose:
Mtns Seprected nistoncal cost of P2 millon. At 2 January
2014 it had a remaining life of 20 years. After a re-organizatior
——ar TS oa Ai OpentaPes a
Page FoF ao Auditing Problems
sera
on 1 July 2014, the
' the property was i
reclassified as an invest S Tet to a third
iment, Party ar
of the fair value model. An indepen fing Calamba's policy
Property to have a fair valu
valuer assessed 1
had risen to P2.34 million at
1¢ of P2,3 million att
t 31 December 2014, SY 2014» which
Property B
Another office building
ilding sub-let to a subsidi
January 2014, it had a fair value of P18 nay
1.65 million at 31 December 2014, At i}
@ remaining life of 15 years.
of Calamba. At 1
‘on which had risen
nuary 2014 it had
QUESTIONS:
Based on the above and th
ie result of your audit, deter
amounts that should be recognized by the entity in respect oF the
above properties as of and for th
soos arenes ae for the year ended December 31,
IS-BERecation expense
a. 150,000 <.P50,000
b. P100,000 7 a Nil,
17. Fair value adjustment gains in profit or loss
a. P 40,000 c. P390,000~
b. P190,000 d. P540,000
18. Net amount in profit or loss ,
a. P540,000 c. P190,000/
b. P490,000 d. P140,000
19. Net amount in other comprehensive income
a. PS00,000 c. P300,000
b. 350,000 d. Nil /
20. Carrying amount of investment properties
a. P3,990,000 a 150,000
'b. P2,340,000 + a.
AP OpentairBs a4
Pageb oto wanrecom.oh
‘Aung Problems SETA
PROBLEM NO. 5
‘of Bacolod Company disclosed that your client kept
red records. Purchases of merchandise were paid for by
but most other items were out of cash receipts. The
company’s collections were deposited weekly. No record was
kept of cash in the bank, nor was a record kept of sales.
‘Accounts réceivable were recorded only by keeping a copy of the
ticket, and this copy was given to the customer when he paid his,
account
Additional information:
‘a.On January 2, 2014 Bacolod Company started business and
issued share capital, 72,000 shares with P100 pat, for the
following considerations:
Cash P_ 600,000
Building (useful life, 15 years) 5,400,000
ban 1,800,000
27,800,090
b.An analysis of the bank statements showed total deposits,
including the original cash investment, of P4,200,000. The
balance in the bank statement on December 31, 2014, was
300,000, but there were checks amounting to P60,000 dated
in December but not paid by the bank until January 2015.
Cash on hand on December 31, 2014 was P150,000 including
customers’ deposit of 90,000.
c. During the year, Bacolod borrowed P600,000 from the bank
and repaid P150,000 and P30,000 interest.
4d. Disbursements paid in cash during the year were as follows:
120,000
120,000
240,000
Fame Foz AP OpanisiPas 14 ‘Auditing Problems om
A
©: An inventory of merchandise taken on bs
showed P906,000 of merchandise, ent ony
F- Tickets for accounts receivable totaled P1,08
of that amount may prove uncollectible,
9. Unpaid suppliers inv
420,000.
h. Equipment with*a cash price of 480,000 was purchased in
carly January on @ one-year instaliment basis. During the
year, checks for the down payment and all maturing
installments totaled P534,000, The equipment has a useful lift
of 5 years.
10,000 but P60,000
‘olces for merchandise amounted to
QUESTIONS:
Based on the above and the result of your audit, determine the
following: {Disregard income taxes)
ayments for merchandise purchases in 2014
a. P2,586,000 c. P2,646,000
b. 2,436,000 ds P3,246,000
32. Collections from sales in 2014 ne
2 P3,720,000 c, P3,000,000
b. P4,320,000 d. 4,920,000
23. Net income for the year ended December 31, 2014
2. P1,770,000 _&r" 1,560,000
ye neh d. P 960,000
Shareholders’ equity as of December 31, 2014
a. P9,390,000 ¢. 9,180,000
b. 9,240,000 (a3) 8,580,000
25. Total assets as of December 31, 2014
a. 9,583,200 9,390,000
b. 9,540,000 (2 P9450,00
ices
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|
Ausitng Problems SseTA
PROBLEM NO. 6
‘Cebu Company had the following bank reconciliation on June 30,
2014:
Balance per bank statement, June 30, 2014 3,000,000
Add: Deposit in transit 400,000
Total 3,400,000
Less: Outstanding checks 900.000
Balance per book, June 30 22,200,000
The bank statement for the month of July 2014 showed the
following:
Deposits (including 200,000 note collected
for Cebu) 9,000,000
Disbursements (including P140,000 NSF
check and P10,000 service charge) 7,000,000
All reconciling items on June 30, 2014 cleared through the bank
in July. The outstanding checks totaled P600,000 and the
deposits in transit amounted to P1,000,000 on July 31, 2014,
QuesTions:
Based on the above and the result of your audit, you are to
Drovide the answers to the following:
26. What is the amount of cash receipts per books in July?
a. 9,600,000 (9,800,000
b. 9,400,000 P8,400,000
27. What is the amount of cash disbursement per books in July
‘2. P6,550,000 7,450,000
b. 6,700,000 PSs
28. What is the cash balance per books at July 317
a. 5,400,000
b. P5,350,000
‘Pope of yainaorezaan
3
I
: Auditing Problems —
QUESTIONS:
Based on the above and the result of your audit, answer thi
following:
p48a,400 ¢. P503,200
B. P484,000 d. P483,200
32, cash shortage as of December 31, 2014 is
ij P18,800
‘a. )P19,200 &s
~ Pig.400 a. P 0
a. P13,360-— {220.820
P1060, a
34. WhictY statement is incorrect regarding audit of cast
~~ a, The auditor places Tore emphasis ‘on the audit of the
~~ Gash account because of the account's susceptibility to
fraud. v
b. A possible intentional overstatement of cash may be
a overed up by omitting large belance-outstanding checks
bank reconciliation.
To tre murol risk 1s assessed at a high level for cash, the
perform detailed substantive tests.
ees @ 7 the cash account requires
internal control oV
& Seong tena cone oe spate for many he
oreo prepare the bank fec0n
beeen ienced with the transactions.
thabptrson is most experi
, 7
Inventory. 750,000 UL Gary
December 31, 203.
Cash P3a1,180
Notes receivable P34i,180
ccember 31, 2
Cash P341,180
Notes receivable 341,180
Davao Corporation reported the notes receivable in
its statement
of financial position at December 31, 2013 an
trade and other receivables. MF SONS shoe
QUESTIONS: : \
a Soerics
a _ ‘Auditing Problems
Based on the above and the result of your audit, answer the
following:
a
db.
‘interest rate on the note is
10% c. 12%
11% = 13%
37. Profit for 2013 is overstated by 7
a.
b.
a.
349,900 Ce. P505,900
P361,900 d- P 49,900
38. Retained earnings as of December 31, 2014 is overstated by
Nil a 241,562
349,900 4. 217,973
b.
39. The working capital as of December 31, 2014 is overstated by
776,197 cc. P787,084
682,360 da. Nil
40. Which of the following is the major risk associated with
receivables?
a.
b.
c
4.
rse.
They may be sold to a bank with 7
when in fact they will
They may be recorded as long-te!
be realized in the current period.
They will not be realized for the entire amount due
They are pledged as collateral as disclosed in the
footnotes to finanicial statements.
PROBLEM NO. 9
Presented below are unaudited balances of selected accounts -
Lipa Corporation as of December 31, 2014. During the course
your audit of Lipa’s books you obtained additional information
affecting these accounts.
Debit Credit
Cash P 500,000
Accounts receivable 1,300,000 v
Bin, for doubtful accounts 1000 50,000
a
es Pp OpentatPasi#
Pega 166720 Sawectccomach om
SETA
‘Audling Problema SETA
Accounts payable ————--—-——_._*S_ 666 685
Purchases, net 4,350,000
Cars and trucks 3,200,000
Machinery and equipment ‘950,000
Accumulated depreciation, machinery Fae
and equipment 95,000
Additional information:
a)On December 28, 2014, the company recorded and wrote
check payments to creditors amounting to P300,600. A
umber of checks, amounting to P150,000 were mailed on
January 3, 2015.
b) On December 29, 2014, the company purchased and recewed
goods amounting to P100,000 terms 2/10, 0/30. As a policy,
the company records purchases m accounts payable at net
amounts. This particular invoice was recorded and paid on
January 3, 2015.
c) On December 26, 2014, a supplier authorized the company to
return goods shipped and billed at P&0,000 on December 3,
2014, The goods were returned on December 28, 2014. The
supplier's credit memo was received and recorded on January
5, 2015.
4) Goods amounting to P50,000 were invoiced for the account of
a customer and recorded on January 2, 2015 with terms of net
60 days, FOB shipping point. The goods were shipped on
December 30, 2014
e) The bank returned on December 29, 2014 a customer check
for P5,000 marked “DAIF” but no entry was made.
f) The company estimates’ that allowance for uncollectible
accounts should be one and one-half percent (1 ¥2%) of the
accounts receivable balance as of year end. No provision has
yet been made for 2014. ‘ ~
age 17 oF 26 Sempcccom.oh 7 d ‘AP OpenistPOs.14 £.
AvdtingProbioms oy sora
4g) All cars and trucks were acquired on May 1, 2014 at a total
cost of P1,200,000. The company estimates the useful life of
the cars and trucks as five years and depreciates these assets
based on 150% of declining balance. As a policy, depreciation
is computed to the nearest month and rounded off to the
nearest peso. No depreciation has been recorded for cars and
trucks as at December 31, 2014,
Seo
QUESTIONS:
Based on the above and the result of your audit, answer the
following:
AL ANE Gajusted amount of cash as of December 31, 2014 is
a. P500,000 AE bed
b. P495,000 Ca 848
The net realizable value of accounts receivable as of
December 31, 2014 is
a 75 cc. 1,329,750
GL naiesrs 4. 1,280,500
43. The adjusted amount of accounts payable as of December 31,
O14 is
SS cc. P618,000
239,000 d.P769,600
B. P848,000
44The adjusted carrying amount of property and equipment as
Oo 3 14s
CiSeusis.000" ° «71,695,000
b P1,533,500 bb
would provide the
one of the following procedures wou e
a. Fixed asset schedule
(By Purchase invoice
T. Receiving report
d. Inquiry of the purchasing agent
‘Auditing Problems sepa!
PROBLEM NO. 10
Select the best answer.
46. Which statement is incorrect regarding audit of acquisition
and payment cycle and inventory?
2. In order for the auditor to perform an engagement on a.
manufacturing firm, it is important that the entire
<~integrated process is understood.
1 indication of potential inventory fraud is that inventory
levels are growing faster than sales. >
Supply chain’ management nas helped many companies
improve the efficiency of operations.
4, Inventory is complex and typically considered a high-risk
area in audits of service firms,
42.Which statement igfrue regarding audit of acquisition and
Payment cycle and invertory?
, 4. The acquisition process begins with a purchase of goods
enn OF services.
~ b.) Management may intentionally misstate inventory
_’ balances by overvaluing items that are obsolete.
¢, Inventory turnover is often calculated by the auditor for
proper disclosure in cient financial statements.
d. A purchase order identifies the quantity and description of
produets that have been received.
48. Which statement is incorrect regarding audit of acquisition
‘and payment cycle and inventory?
@. For proper control, the receiving department should
receive a copy of the purchase order that has the
quantities blanked out. ©
b. Inventory may become obsolete because of technological
advances even though there are no signs of physical wear
and tear. /
Proper internal control over the inventory account would
require that inventory items should be reviewed for
‘obsolescence and proper accounting treatment. /”
weasag ee
Page or20
"ae aceon ah = AP DpantsPes. ia
a Auditing Problems Sety,
“The auditor is responsible to take a physical inv
the client location on behalf of the audit client ye at
49. Which statement is (true regarding audit of acquisition and
payment cycle and inventory?
Piss counts are performed by the auditor
to give the
impression of control and they are not used fe
substantive testing.
b. Sources of information regarding a client's inventory
observation.
¢. Quality control in the manufacturing process is’ an
operational concern and does not apply to auditor
assessment of internal control.
The acquisition and payment cycle typically begins with
the cash disbursement for requested raw materials.
t of materials for the production process bears a direct
_felationship to
(2:) Authorization of purchases.
B. Vendor selection.
¢. Obsolescence of inventory.
d. Recording of accounts payable.
> end of examination -
Please submit your answer sheet
Keep the questionnaire.
Thank you
for taking the PRTC Open Pre-Board Examinations! ©
