LA CONSOLACION COLLEGE - MANILA Auditing Problem Final Quiz # 1
INS!"CION INS!"CION Sele$t t%e t%e $orre$t $orre$t an&'er an&'er (or ea$% ea$% o( t%e t%e (ollo'ing (ollo'ing )ue&tion&* )ue&tion&* Mar+ onl, one an&'er (or ea$% item b, &%ading t%e bo $orre&.onding to t%e letter o( ,our $%oi$e on t%e an&'er &%eet .ro/ided* .ro/ided* S!ICL0 NO E!AS"!ES ALLOE2* "&e .en$il no* 1 onl,* onl,* SI"AIONAL Situation 1 3 1* Pre.are Pre.are t%e audi auditt ad4u&tmen ad4u&tmentt re)uired re)uired in t%e t%e .roblem* .roblem* 5* Po&t t%e net ad4u&tment ad4u&tment at t%e or+ing or+ing 6alan$e 6alan$e S%eet S%eet 76S8 and and or+ing or+ing Pro(it and Lo&& 7PL8* 9* Com.ute Com.ute t%e (inal (inal balan balan$e& $e& o( ea$% ea$% a$$ount a$$ount on ,our ,our 6S and and PL* PL* :* Some .e&o .e&o amount& amount& in t%e .roblem .roblem are rounded rounded o(( to t%e neare&t t%ou&and&* t%ou&and&* ;* A&&ume A&&ume no ot%er ot%er i&&ue&< i&&ue&< e$e.t e$e.t t%o&e di&$u&& di&$u&&ed ed in t%e .roble .roblem* m* P!O6LEM MA= L"= APPLIANCES CO!PO!AION 0ou are are a&&i a&&ign gned ed to eam eamin ine e t%e t%e boo+ boo+& & o( a$$o a$$oun unt& t& o( MA= MA= L"= L"= APPLI PPLIAN ANCE CES S CO!PO CO!PO!A !AI ION ON (or t%e t%e ,ear ,ear 5>1> 5>1>** %i& %i& i& an initial initial audit audit &in$e &in$e t%e $om.a $om.an, n, 'a& e&tabli&%ed e&tabli&%ed on ?anuar, 5< 5>1>* 5>1>* It& main .ur.o&e .ur.o&e i& to &ell a..lian$e& a..lian$e& and &e$ondaril, &e$ondaril, to re.air and &er/i$e u&ed a..lian$e&* It& main o((i$e and &%i. i& lo$ated in Ma+ati Cit,* Sin$e t%i& i& t%e (ir&t audit< ,ou a&+ed (or $o.ie& o( do$ument& (or ,our .ermanent (ile and &u$% a& arti$le& o( in$or.oration< b, la'&< $ontra$t&< minute& o( t%e meeting and li&t o( board o( dire$tor& and .rin$i.al o((i$er&* 0ou 'ere t%en gi/en a $o., o( t%e unad4u&ted balan$e &%eet and .ro(it and lo&& &tatement dated 2e$ember 2e$ember 91< 5>1>* 0ou 0ou a& auditor noted t%e (ollo'ing (ollo'ing in(ormation relati/e relati/e to t%e a$$ount& o( Ma% Lu% A..lian$e&* %e $om.an, maintain& a$$ount& 'it% 6an+ o( Commer$e and ,ou 'ere gi/en a $o., o( t%e ban+ re$on$iliation &tatement< '%i$% &%o'ed t%e (ollo'ing 6alan$e .er ban+ Add 2e.o&it in tran&it 6an+ debit memo& 6an+ error Le&& Out&tanding $%e$+& 6an+ $redit memo 6alan$e .er boo+&
P @;<9:> 19@<5;> 19@<5;> 591<5@> 1> 75@<9B>8 71<;>8 P :B<95>
0our (urt%er anal,&i& re(le$ted t%e (ollo'ing 1* A $%e$+ $%e$+ (or P55<;> P55<;>> > re$ei/e re$ei/ed d (rom (rom a $u&tom $u&tomer er '%o&e '%o&e a$$oun a$$ountt i& $urren $urrentt %ad %ad been de.o&ited de.o&ited and t%en returned b, t%e ban+ ban+ on 2e$ember 5B< 5>1>* No entr, 'a& made on t%e returned $%e$+* %e $u&tomer re.la$ed t%e $%e$+ on ?anuar, 1;< 5>11* 5>11* 5* A $%e$+ $%e$+ (or (or P;<5> P;<5> 'a& 'a& $leared $leared b, t%e t%e ban+ ban+ a& P<;5 P<;5>* >* %e ban+ ban+ made made t%e t%e $orre$t $orre$tion ion on ?anuar, 5> 5>11* 9* A $%e$+ $%e$+ (or P9<;> P9<;>> > re.re& re.re&en entin ting g .a,men .a,mentt o( an em.lo em.lo,e ,ee e ad/a ad/an$e n$e 'a& re$ei/e re$ei/ed d on 2e$ember 5< 5>1> but 'a& not re$orded until ?anuar, 5< 5>11* :* Po&td Po&tdate ated d $%e$+& $%e$+& total totaling ing P@<9 P@<9>> >> 'ere 'ere in$lud in$luded ed in t%e de.o de.o&it &it in tran&i tran&it* t* %e& %e&e e re.re&ent $olle$tion $olle$tion o( $urrent a$$ount& a$$ount& re$ei/able (rom $u&tomer&* $u&tomer&* %e $%e$+& 'ere 'ere a$tuall, de.o&ited on ?anuar, B< 5>11* Auditing Problems
Page 1 of 9
;* Dariou& ban+ debit memo& (or dra(t& .ur$%a&ed (or .a,ment o( im.ortation o( a..lian$e& totaling P59><>>> 'ere not ,et re$orded* %e&e .ur$%a&e& 'ere .re/iou&l, &et u. a& a$$ount& .a,able* Said a..lian$e& arri/ed in 2e$ember 5>1>* @* Intere&t earned on t%e ban+ balan$e (or t%e : t% )uarter o( 5>1>< amounting to P1<;> 'a& not re$orded* * 6an+ &er/i$e& $%arge& (or o/erdra(t and MC $%arge& totaling P1<5@> 'ere not re$orded* 0our $ount o( .ett, $a&% (und on ?anuar, ;< 5>11 &%o'ed t%at t%e $om.an, %a& P9><>>> (und maintained on im.re&t ba&i&* Dariou& e.en&e& (rom t%e (und dated 2e$ember 5>1> totaled P1@<5;> '%ile t%o&e dated ?anuar, 5>11 amounted to P;<>9* Anot%er di&bur&ement (rom t%e (und dated 2e$ember 5>1> 'a& a $a&% ad/an$e to em.lo,ee amounting to P9<;>>* A re.leni&%ment o( t%e .ett, $a&% (und 'a& made on ?anuar, B< 5>11* %e $om.an, u&e& t%e allo'an$e met%od o( a$$ounting (or un$olle$tible trade re$ei/able&* %e allo'an$e i& &et at @ o( .a&t due a$$ount& o/er 15> da,& and 9 o( $urrent a$$ount& a& o( t%e end o( t%e .eriod* A& o( ,ear-end< a$$ount& re$ei/able o/er 15> da,& totaled P5B<5>>* Ad/an$e& (rom t%e $u&tomer& amounting to PB<9@> 'ere $redit to &ale& on 2e$ember 1;< 5>1>* %e good& 'ere deli/ered to $u&tomer& in ?anuar, 5>11* A re/ie' o( $u&tomer& ledger& di&$lo&ed t%at a $olle$tion o( P5B<>; on No/ember 1>< 5>1> (rom !oland Sale& 'a& $redit to t%e a$$ount o( !o&ale& rading* %e $om.an, u&e& t%e .%,&i$al in/entor, met%od o( a$$ounting (or mer$%andi&e* in/entor, li&t 'a& &ubmitted to ,ou b, t%e a$$ountant on ?anuar, 5;< 5>11*
An
On t%e ba&i& o( t%e li&t< ,ou and ,our &ta(( $ondu$ted a te&t $%e$+ o( t%e item& to determine t%e a$$ura$, o( t%e in/entor,* 0ou noted t%e (ollo'ing on ?anuar, 5;< 5>11* 1* A &ale on a$$ount o( a D &et 'it% a &elling .ri$e o( 9B<;>> %a& not ,et been re$orded but t%e $orre&.onding $o&t alread, been dedu$ted (rom t%e in/entor,* 5* An a..lian$e& $o&ting P5><B> 'a& li&ted t'i$e in t%e &$%edule* 9* %e unit .ri$e o( 5; unit& o( re(rigerator& indi$ated in t%e li&t 'a& o/er&tated* Per &u..lier& in/oi$e< t%e .ri$e i& P1><5;>< '%ile t%e li&t re(le$ted P11<5;>* :* A &ale& in/oi$e (or P1<1B> 'a& .re.ared on 2e$ember 5< 5>1> (or one unit 'a&%ing ma$%ine ordered in 2e$ember b, t%e $u&tomer< but &%i..ed onl, on ?anuar, ;< 5>11 on FO6 &%i..ing .oint* Said in/oi$e 'a& not re$orded a& o( ,ear-end* 0our .%,&i$al $ount o( &to$+ $erti(i$ate& +e.t b, t%e &e$uritie& $u&todian tall, 'it% t%e (igure& .er boo+& '%i$% re(le$ted t%e (ollo'ing detail& Name o( Sto$+
Number o( S%are&
A6S-C6N 2MCI e..%il Piltel "rban 6an+ otal
;>> 9<>>> ;<;>> 5<>>> 5>>
Mar+et Dalue Per S%are
Co&t P 5><;> 5<15> 1;<:>> :<@B> ;> P 15<;
P :9*;> 1>*5; 1*9> 9>*>> 5:;*>>
0our re/ie' o( $or.orate a$tion& t%at t%e &to$+ di/idend& o( 2MCI (or 5>> &%are& and Piltel o( 9>> &%are& %a/e not been re$orded a& o( ,ear-end* All o( t%e abo/e &e$uritie& are a$ti/el, traded in t%e &to$+ e$%ange* %e $om.an, re$ord& t%e &e$uritie& at lo'er o( $o&t or mar+et* A$$rued intere&t on t%e (ollo'ing loan& granted to 6in =ua rading< an a((iliate< 'a& not ta+en u. at ,ear-end* Dalue 2ated Page 2 of 9
2ue 2ate
!ate
Prin$i.al Examination
O$tober 91< 5>1> No/ember 5>< 5>1>
A.ril 9>< 5>11 Mar$% 5>< 5>11
1; 1@
P 5>><>>> 9;><>>>
Ma% Lu% boug%t o((i$e and &tore &u..lie& on t%e (ollo'ing date& and boo+ed t%em a& e.en&e& Mar$% 9< 5>1> ?une 1;< 5>1> Se.t* < 5>1> otal
P 5B<9>> 1<1;> 99 P <9>>
A& at ,ear-end< unu&ed &u..lie& amounted to P5:<1>* %e $om.an, entered into a $ontra$t 'it% an ad/erti&ing agen$, to .ro/ide and de/elo. .romotional ad& (or it& .rodu$t&* On Ma, 91< 5>1>< a total o( P1B><>>> 'a& .aid to t%e agen$, and t%i& 'a& boo+ed a& e.en&e* %e ad 'ill run (or a .eriod o( one-,ear u. to Ma, 91< 5>11* %e $om.an, in&ured t%e building (or a P;*> million $o/erage e((e$ti/e Februar, 1< 5>1>* %e annual .remium .aid amounted to P99<5;>* Li+e'i&e< t%e mer$%andi&e in/entor, 'a& al&o $o/ered b, a P*> million .oli$, '%i$% i& e((e$ti/e A.ril 1< 5>1>* Annual .remium .aid on A.ril 1;< 5>1> amounted to 5<;>>* %e total .remium .aid (or t%e building and in/entor, 'a& boo+ed a& .re.aid in&uran$e* %e $om.an, reno/ated t%e building at a $o&t o( P;;><>>> '%i$% 'a& boo+ed a& re.air e.en&e& on ?une 9>< 5>1>* 6a&ed on ,our di&$u&&ion& 'it% t%e Controller< t%i& im.ro/ement i& to be amortized o/er ; ,ear&* o generate additional in$ome< Ma% Lu% A..lian$e& lea&ed a .ortion o( t%e 5 nd (loor (or P9@><>>> (or one ,ear ending ?ul, 91< 5>11* %e amount re$ei/ed 'a& re.orted a& rental in$ome (or 5>1>* On Ma, 91< 5>1>< t%e $om.an, boug%t &e/eral unit& o( $om.uter& totaling P1B><>>> to be de.re$iated on t%e &traig%t line met%od o/er t%eir e&timated u&e(ul li(e o( : ,ear&* In t%e addition to t%e $o&t< it .aid additional $%arge& '%i$% 'ere ta+en u. a& a re.air e.en&e&* 2eli/er, $%arge& In&tallation $o&t e&ting $o&t
P ;<>>> B<;> H <5;> P 5><>>>
No de.re$iation (or t%i& e)ui.ment 'a& re$orded at ,ear-end* On Februar, 1< 5>1>< t%e $om.an, .ur$%a&ed a .ar$el o( land 'it% an old 5-&tore, building (or P@*> million to %ou&e it& o((i$e< &tore and 'are%ou&e* %e building %a& an e&timated u&e(ul li(e o( 9> ,ear&* %e a&&e&&ed /alue o( t%e .ro.ert, (or real e&tate ta .ur.o&e& indi$ate& t%e amount P5*B million (or t%e land and P1*5 million (or t%e building* No de.re$iation 'a& boo+ed a& o( ,ear-end* %e $om.an, in$urred organization $o&t o( P15><>>> re(le$ted under Ot%er A&&et&* %i& in$lude& in$or.oration e.en&e&< legal (ee&< and ot%er admini&trati/e $o&t&* %i& i& to be amortized o/er a .eriod o( ; ,ear&* A& o( ,ear-end< amortization %a& not ,et been re$orded* A$$ount& .a,able-trade in$lude& $a&% ad/an$e& (rom t%e Pre&ident totaling P9>><>>> '%i$% 'a& u&ed to augment 'or+ing $a.ital re)uirement* It al&o in$lude& &ome a$$rued e.en&e& &et u. b, t%e a$$ountant at ,ear-end amounting to P9;<>>* 0ou re/ie'ed &ub&e)uent .a,ment& made in ?anuar, 5>11 '%i$% in$lude t%e (ollo'ing Ele$tri$ bill& (or 2e$ember 5>1> Sale& $ommi&&ion& (rom O$tober to 2e$*5>1> ele.%one bill& (or 2e$ember 5>1> Auditing Problems
P 9B<;> 5@<1:> ;<5> Page 3 of 9
ater (or No/ember and 2e$ember 5>1> Minor re.air o( a /e%i$le done in 2e$* 5>1>
:> 9<5;> P B<59>
%e $om.an, obtained a &%ort-term loan o( P;><>>> (rom t%e ban+ to augment $a&% re)uirement&* %i& 'a& /alued on No/ember @< 5>1> .a,able a(ter 15> da,&* Intere&t rate i& 1@ .er annum* No a$$rual 'a& re$orded at ,ear-end* o generate additional (und& (or 'or+ing $a.ital< Ma% Lu% i&&ued P5<5>><>>> o( 1: ;-,ear bond& at 5 on ?ul, 1< 5>1>* %i& di&$ount 'a& $%arged to intere&t e.en&e* Intere&t e.en&e on t%e bond& i& .a,able &emi-annuall, on ?anuar, 1< and ?ul, 1< o( ea$% ,ear* No a$$rual 'a& made a& o( 2e$ember 91< 5>1>* A& an in$enti/e to t%e em.lo,ee to eert more e((ort in t%eir &ale& $am.aign< Ma% Lu% $ame out 'it% a .oli$, to di&tribute an amount e)ui/alent to 1 o( gro&& &ale& a& annual bonu&* %i& 'ill be gi/en to all regular em.lo,ee& ba&ed on t%eir indi/idual .er(orman$e to be .aid to t%em a(ter t%e relea&e o( t%e (inal audited &tatement&*
MAH LUH APPLIANCES CORPORATION or+ing 6alan$e& S%eet 2e$ember 91< 5>1> Per 6oo+& Current Assets Pett, Ca&% Fund Ca&% Mar+etable Se$uritie& Allo'an$e (or 2e$line in Mar+etable Se$uritie& A$$ount& !e$ei/able Allo'an$e (or 2oubt(ul A$$ount& Note& !e$ei/able Intere&t !e$ei/able In/entorie& Pre.a,ment& 2e(erred In$ome a otal Property, Plant and Equipment Land and 6uilding 6uilding Im.ro/ement 2eli/er, E)ui.ment Furniture< Fiture&< E)ui.ment otal A$$umulated 2e.re$iation Net 6oo+ Dalue Oter Assets Total Current Lia!ilities A$$ount& Pa,able A$$rued E.en&e& Note& Pa,able Intere&t Pa,able In$ome a Pa,able "nearned !ental In$ome Ot%er Liabilitie& otal Lon"#Term Lia!ilities 6ond& Pa,able
Page 4 of 9
P
Audit Ad4u&tment
Final 6alan$e
9><>>>*>> :B<95>*>> 15<;>*>> @B><>>>*>> ;;><>>>*>> 1<;9><>>>*>> 1>;<;>*>> 9*>>
@<>>><>>>*>> ;;<>>>*>> 551<>>>*>> @<@<>>>*>> 7195<@>>*>>8 @<@@9<:>>*>> 15><>>>*>> P1><@>><55>*>>
P 5<>BB<55>*>> 9@<>>>*>> ;><>>>*>> 1><>>*>> 515<>>>*>> 9<1@<15>*>>
5<5>><>>>*>>
Examination
2i&$ount& on bond& Pa,able otal
5<5>><>>>*>>
Sto$%olders& Equity Paid-u. Ca.ital 3 ;><>>> &%are& at P1>> .ar /alue ;<>>><>>>*>> Net In$ome 5>:<1>>*>> otal ;<5>:<1>>*>> Total P1><@>><55>*>> MAH LUH APPLIANCES CORPORATION or+ing Pro(it and Lo&& 0ear Ended 2e$ember 91< 5>1> Per 6oo+& Sale& Co&t o( Good Sold Gro&& Pro(it O.erating E.en&e& In$ome (rom O.eration& Ot%er In$ome Ot%er C%arge& In$ome 6e(ore ae& Pro/i&ion (or In$ome a NE INCOME
1* Pett, Ca&% A* 19<;> 6* 9><>>> 5* Ca&% A* :95<1> 6* :;;<51> 9* Net !ealizable Dalue o( Se$uritie& A* 15<;> 6* 1<>> :* A$$ount& !e$ei/able A* B>B<9>> 6* @B><>>> ;* Allo'an$e (or 2oubt(ul A$$ount& A* 95<5;> 6* 91<> @* Note& and Intere&t !e$ei/able A* ;;><>>> 6* ;@1<:@1 * In/entorie& A* 1<;>;<>>> 6* 1<;><55> B* Pre.aid In&uran$e A* B:;<>>> 6* 1B><>>> 1>* "nu&ed O((i$e Su..lie& A* <9>> 6* ;;<11> 11* 2e(erred In$ome a A* 11<;5; 6* B;<>5; 15* Co&t o( Land A* @<>>><>>> 6* 1><>>> 19* Net 6oo+ Dalue o( 6uilding A* 1><>>> 6* 5<5:><>>> 1:* otal Pro.ert,< Plant< E)ui.ment A* <9@@<>>> 6* <9:@<>>> 1;* A$$umulated 2e.re$iation A* 51<@ 6* 51@<@ 1@* Ot%er A&&et& A* 5<;>> 6* <;>> 1* A$$ount& Pa,able A* 5<>BB<55> 6* 1 1B* Note& and !elated Intere&t Pa,able Auditing Problems
Audit Ad4u&tment
Final 6alan$e
P :<@:<>>>*>> 79<5B><>>>*>>8 1<9@<>>>*>> 71<59B<>>>*>>8 15<>>>*>> 9;<>>>*>> 751><>>>*>>8 91:<>>>*>> 71><>>*>>8 P 5>:<1>>*>>
C* :<9:
2* 1><5;>
C* ;>><>1>
2* :B<95>
C* 1@<;>
2* 1;;<>>
C* B;>
2* :1<>>>
C* 95<55
2* ;;@<9B
C* ;;;<>B9
2* ;;@<9B
C* 1<:B:<55>
2* 1<;9><>>>
C* 1>;<;>
2* 5>
C* @><>>>
2* ;<>>>
C* 5:<1>
2* 9<@>
C* 5
2* 9<;>>
C* :<5>><>>>
2* 5><>>>
C* 1<:;<>>>
2* 1<5>><>>>
C* @>>
2* @<@<>>>
C* 5:5<@>>
2* 195<@>>
C* 15><>>>
2* @<>>>
C* 1<;5<;5>
2* 1<;55<;5>
Page 5 of 9
A* 55<999 6* @B<999 1* otal Intere&t Pa,able A* 1B<999 6* 15<999 5>* A$$rued E.en&e& A* 1@><1>1 6* 1:<9> 51* In$ome a Pa,able A* 1><>> 6* <>BB 55* "nearned !ental In$ome A* 9@><>>> 6* 1;><>>> 59* Ot%er Liabilitie& A* ;15<>>> 6* 91><9@> 5:* Carr,ing Dalue o( 6ond& Pa,able A* 5<1B5<:>> 6* 5<5>><>>> 5;* Sale& A* :<@:<>>> 6* :<;:B<@:> 5@* Co&t o( Good Sold A* 9<95;<B> 6* 9<9>;<>>> 5* O.erating E.en&e& A* 1<59B<>>> 6* 1<>@;<1>B 5B* In$ome (rom O.eration& A* 15<>>> 6* 91;<95 5* Ot%er In$ome A* :>B<:11 6* 9;<>>> 9>* Ot%er C%arge& A* 5>@ 6* :>1<19 91* In$ome 6e(ore ae& A* 5::<:> 6* 5:9<91; 95* Pro/i&ion (or In$ome a A* B;<;@; 6* B: 99* Net In$ome A* :<;@; 6* 1:<9B5 9:* aable In$ome A* :;:<:> 6* 91:<>>> 9;* Earning& Per S%are A* 5*; 6* 9*1
C* ><>>>
2* ;><>>>
C* 1;:<>>>
2* 1:<>>>
C* 1;<>>>
2* 9@<>>>
C* 1@<>;
2* 1;<>@;
C* 51><>>>
2* 1B><>>>
C* @1><9@>
2* 515<>>>
C* :<@B;<;>>
2* :<;B<1:>
C* :<@B;<;>>
2* :<;B<1:>
C* 9<5B><>>>
2* 9<9>><B>
C* 1<;:><1>B
2* ><1>B
C* 1B5<;5
2* 515;5
C* 1B@<;>
2* 1B<:11
C* 51><>>>
2* 55;<19
C* :5><:>
2* 91:<>>>
C* 1><>>
2* <>BB
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2* 5>:<1>>
C* 5<9;
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J J J EN2 J J J
Page 6 of 9
Examination
