Solution AP Test Bank 1

SOLUTION - AUDITING PROBLEMS TEST BANK 1 PROBLEM 1 – TANYING CORP. 1. B Sales (P1,353,000 + P10,500 Freight) Sales returns and allowances Sales discounts !et sales

P1,363,500 (11,700) (2,60) P1,3",160

2. C #n$entor%, &an. 1 Purchases Purchase returns and allowances (P2,'00  6) Freight in (P16,575 + P1,710) *ost o goods a$ailale or sale

P26",100 P2,'00 (25,'') 1',2'5

3. D #n$entor%, -ec. 31, 2017 Per oos /oods out on consignent Per audit

17,5"7 P6'6,6"7

P 61,650 55,'00 P117,50

. C -istriution costs Sales salaries and coissions (P75,000 + P",1'0  3) P75,275  4d$ertising eense (P',270 + P5,5  26) 50,0'' -ereciation eense  Salesdeli$er% e8uient e8uient (P1',300 + P23,00  10  1012) 20,250 Freight eense 10,500 9ra$el eense  sales reresentati$es 13,6'0 :iscellaneous selling eenses ',220 9otal P17',013 5. B  4dinistrati$e eenses ;egal ser$ices #nsurance and licenses -ereciation eense  oice e8uient salaries -outul accounts eense (P7'3,000  2 ? P15,660  P'0) 9otal 6.  A  4llowance or doutul accounts (P7'3,000  2)

P 6,675 23,00 12,600 1",200 ,25 2,'65 10",'00 15,1'0 P1"3,7'5 P15,660

7. D !et sales *ost o goods sold (P6'6,6"7  P117,50) /ross incoe #nterest re$enue (P1,650 + P1,6'0) -i$idend re$enue /ain on sale o assets 9otal incoe

P1,3",160 (56",27) 77","13 3,330 15,50 23,60 P'22,153

'. C 9otal incoe -istriution costs  4dinistrati$e eenses

P'22,153 (17',013) (1"3,7'5) #nterest eense

(13,560) ;oss on sale o e8uient #ncoe ro continuing oerations eore ta ". B =ice sulies in$entor% 10.  A #ncoe eore ta #ncoe ta (P21',""5  30) #ncoe ro continuing oerations #ncoe ro discontinued oerations, net o ta (P120,000  70) !et incoe

(217,'00) P21',""5 P3,675 P21',""5 (65,66") 153,2"6 ',000 P237,2"6

Page 2 PROBLEM 2 – BUNCHING COMPANY 

Per oos  4&A 1 2 3 a  c d e Per audit

 AJES 1.

2.

*ash P"63,200 (65,600) 360,000 BBB BBB BBB BBB BBB P66',600

 4ccounts @ecei$ale P2,25,000 310,000 BBB BBB BBB BBB BBB BBB P2,56,000

(11  C)

(12  B)

Sales  4ccounts recei$ale (P2",500  "5) Sales discounts (P310,000  5) *ash *ash (P372,00  P12,00) Purchase discounts  4ccounts a%ale

3. a 4ccounts a%ale Purchases

#n$entor% P6,050,000 BBB BBB BBB 130,000 (637,500) 217,500 275,000 P6,035,000 (13  A)

4ccounts Pa%ale P,201,000 BBB 372,00 (175,000) BBB BBB 217,500 BBB P,615,"00 (1  B)

360,100 310,000 15,500 65,600 360,000 12,00 372,00 175,000 175,000

 #n$entor% *ost o sales

130,000

c *ost o sales #n$entor%

637,500

d Purchases  4ccounts a%ale #n$entor% *ost o sales

217,500

e #n$entor% *ost o sales

130,000 637,500 217,500 217,500 217,500 275,000 275,000

 !o adCusting entr% 15. C *urrent ratio *urrent assets *ash  4ccounts recei$ale #n$entor% *urrent liailities  4ccounts a%ale  4ccrued eenses

P 66',600 2,56,000 6,035,000 P,615,"00 31,000

P",267,600

5,06,"00 1.'

Page 3 PROBLEM 3 – PAKO COMPANY  16. D Dalance, &an. 1 &une 30 ac8uisition (P1,0'0,000 + P',000) Set. 30 sale -ec. 1 trade in old achine new achine Dalance, -ec. 31

P1,'00,000 1,12',000 (150,000) ("0,000) 270,000 P2,"5',000

17.  A @eainder o eginning alance (P1,'00,000  P150,000  P"0 ,000 ? P1,560,000  10) &une 30 ac8uisition (P1,12',000  10  612) Set. 30 sale (P150,000  10  "12) -ec. 1 trade in old achine (P"0,000  10  1112) new achine (P270,000  10  112) -ereciation eense or 2015

P156,000 56,00 11,250 ',250 2,250 P23,150

GENLUNA COPPERMINES, INC. 1'. C -eletion rate er ton (P1,5'0,000  1,620,000) *oer ore ined in 2017 (15,000  6 onths) -eletion or 2017 -eletion er oos =$erstateent o deletion eense

P"  "0,000 P '10,000 1,215,000 P05,000

1". D -ereciale cost o achiner% (P1,'00,000  "0) Astiated coer ore reser$e -ereciation rate er ton *oer ore ined in 2017 -ereciation eense or 2017 -ereciation er oos =$erstateent o dereciation eense

P1,620,000 1,620,000 P1 "0,000 P "0,000 120,000 P 30,000

20. D &anuar% 1, 201 9otal cost o achine (P300,000 + P3,000 + P12,000) @esidual $alue -ereciale cost Astiated useul lie  4nnual dereciation

P315,000 (12,000) P303,000 10 %ears P30,300

-ereciale cost -ereciation, 2016  201 (P30,300  3 %ears) @eaining dereciale cost, &an. 1, 2017 *ost o new arts 9otal @eaining useul lie (10 %ears  3 %ears) @e$ised annual dereciation

P303,000 ("0,000) P212,100 37,'00 P2","00 7 %ears P35,700

PROBLEM 4 – HARLINGTON COMPANY  21.  A !et incoe eore trading securit% adCustent
P2,700,000 (270,000) P2,30,000

22. B !et incoe eore trading securit% adCustent
P2,700,000 "",000 P2,7"",000

LABADA CO. 23. D /anda *o. Gaston, #nc. (P135  1,'00)

*arr%ing alue P1,710,000 23,000 P1,"53,000

:aret alue P1,75",500 22",500 P1,"'",000


P36,000

2. C !et roceeds (P"3  15,000 ? P1,3"5,000  P13,500) *arr%ing $alue /ain on sale

P1,3'1,500 (1,251,000) P 130,500

25. B 9rading securities at air $alue

P1,"'",000

Page  PROBLEM 5 – SAMSON MFG. CO. 26. C  4ctual orrowing cost Seciic orrowing (P5 illion  10) /eneral orrowings P25 illion  ' P15 illion  6 9otal *aitaliEation rate (P2,"00,000P0 illion)

P500,000 P2,000,000 "00,000

2,"00,000 P3,00,000 7.25

 4$erage eenditures  2016

P7,250,000

*aitaliEale interest  2016 Seciic orrowing (P5 illion  10) /eneral orrowings (P7,250,000  P5,000,000 ? P2,250,000  7.25) 9otal 27. B  4$erage eenditures  2017

P500,000 163,125 P663,125 P16,163,125

*aitaliEale interest  2017 Seciic orrowing (P5 illion 10  612) P250,000 /eneral orrowings (P16,163,125  P5,000,000 ? P11,163,125  7.25  612) 0,663 9otal P65,663 2'.  A

201 interest eense (P3,00,000  P663,125)

P2,736,'75

2". D

2015 interest eense (P3,00,000  P65,663)

P2,75,337

30. B  4ccuulated eenditures eore interest #nterest caitaliEed in 2016 and 2017 (P663,125 + P65,663) 9otal cost o uilding

P1",500,000 1,317,7'' P20,'17,7''

PROBLEM 6  Y#&-

C!"#$%&'($ E"#$%# /- P#-(0

C&*)*&'($

C)!)*&'(+# C!"#$%&'($ E"#$%#

1

30,000 otions  P5 air $alue 

P 50,000

P 50,000

2

30,000 otions  P5 air $alue 

50,000

100,000

3

30,000 otions  P5 air $alue 

50,000

150,000

31.

C

32.

C

33.

D

3.

D

35.

D

PROBLEM  – BRANDY CO. 36. C

=rdinar% shares issued and outstanding =rdinar% shares suscried 9otal =rdinar% shares issued to ac8uire land =rdinar% shares originall% suscried Par $alueshare 9otal ar $alue Share reiu (P2,'50,000  P50,000) 9otal suscrition rice

72,000 72,000 1,000 (2,000) 120,000  P10 P1,200,000 2,00,000 P3,600,000

H P6"0,000 F o land  P20,000 P

37. D

Suscrition o 12,000 reerence shares I P120share Suscrition o 60,000 reerence shares I P100share 9otal  JearBend alance o suscritions recei$ale  reerence  4ount collected ro suscriers

P1,0,000 6,000,000 7,0,000 (360,000) P7,0'0,000

3'. B #ssued Suscried Share reiu Suscritions recei$ale *ontriuted caital

Preerence P6,600,000 600,000 20,000 (360,000) P7,0'0,000

=rdinar% P 720,000 720,000 2,'50,000 (1,0'0,000) P3,210,000

Page 5 CONDESSA CO. 1. -i$idends a%ale  reerence (P'  60,000) -i$idends a%ale  ordinar% (P2  600,000) *ash

'0,000 1,200,000

2. 9reasur% shares *ash (P0  '1,000)

3,20,000

3. ;and 9reasur% shares (P0  21,000) Share reiu  treasur%

1,6'0,000 3,20,000 "00,000 '0,000 60,000

. *ash (P105  15,000) Preerence share caital (P100  15,000) Share reiu  reerence

1,575,000

5. @etained earnings (P5  5,000H) Stoc di$idends a%ale (P5  5,000) Share reiu  ordinar%

2,30,000

1,500,000 75,000 270,000 2,160,000

H 600,000  60,000 treasur% shares ? 50,000  10

6. Stoc di$idends a%ale =rdinar% share caital 7. @etained earnings -i$idends a%ale  reerence (P'  75,000) -i$idends a%ale  ordinar% (P2  5",000H)

270,000 270,000 1,7'',000 600,000 1,1'',000

H 50,000 + 5,000

'. #ncoe suar% @etained earnings

","00,000 ","00,000

Preerence share caital (P6,000,000 + P1,500,000) =rdinar% share caital (P3,000,000 + P270,000) Share reiu (P3,750,000 + P60,000 + P75,000 + P2,160,000) @etained earnings (P3,500,000  P2,30,000  P1,7'',000 + P","00,000) (3"  A) 9reasur% shares (P3,20,000  P'0,000) 9otal (0  B)

P7,500,000 3,270,000 6,05,000 ",1'2,000 (2,00,000) P23,5"7,000

PROBLEM  – CABOOM LABORATORIES 1. D *ost to otain atent (&anuar% 2010) 2010 aortiEation (P1'6,15017) *arr%ing $alue, -ec. 31, 2010

P1'6,150 (10,"50) P175,200

2. C *arr%ing $alue, &an. 1, 2011  4ortiEation, 2011B201 (P10,"50   %ears) *arr%ing $alue, -ec. 31, 201

P175,200 (3,'00) P131,00

3. C *arr%ing $alue, &an. 1, 2015  4ortiEation, 2015B2017 (P131,00  35) *arr%ing $alue, -ec. 31, 2017

P131,00 (7','0) P 52,560

BARTOLO COMPANY  .  A *ost o atent urchased on &an. 1, 2016 2016 aortiEation (P,000,00010) *arr%ing $alue, -ec. 31, 2016 2017 aortiEation (P3,600,0005) *ost o ranchise 2017 aortiEation (P"60,00010)

P,000,000 (00,000) 3,600,000 (720,000) P"60,000 ("6,000)

P2,''0,000 '6,000

9otal carr%ing $alue o intangiles

P3,7,000

5. B  4ortiEation o atent  2017  4ortiEation o ranchise  2017 Pa%ent to -elco (P5,000,000  5) @esearch and de$eloent costs 9otal charges against 2017 incoe

P720,000 "6,000 250,000 '66,000 P1,"32,000

Page 6 PROBLEM NO.  – SAMOA COMPANYCHILE CO. 6.  A

=$erB (
7. D

P ',000 0,500 110,000 (75,000) P123,500 =$erB (
=$erstateent o 2017 ending in$entor% Preaid insurance charged to eense in 2016
 Jear 2016 2017

Doo alue o Donds P1,175,000 1,1'2,250

!oinal #nterest P75,000 75,000

0,500 (110,000) (75,000) (P1,500)

=$erB (
Preta incoe Sales re$enue erroneousl% recogniEed in 2016
P

Aecti$e #nterest P'2,250 '2,75'

2017 P3'7,000 1"1,000 (3,200) (7,75') (7,000) ',"50 P'',""2

-iscount 4ortiEation P7,250 7,75'

(2)

2016 2017

". C

(P2,500 K 10) (P2,500 K 10) (P7,000 K 10) 50.

P,250 P,250 ,700

P',"50

D

PROBLEM NO. 1 – OMEGA COMPANYDP, INC. 51. C

*ontainers held % custoers at -ec. 31, 2016 ro deli$eries in 2015 *ontainers returned in 2017 ro deli$eries in 2015 @e$enue ro container sales

52.  A

;iailit% or returnale containers, -ec. 31, 2016 -eli$eries in 2017 9otal 2017 container returns 2017 container sales ;iailit% or returnale containers

53. C

5. D


P'5,000 (57,500) P27,500 P325,000 30,000 755,000

P35,500 27,500

(3'2,000) P373,000

P72,"00 P15,'00 P1',000

55. B

;aor 9otal warrant% eense

36,000 P5,000


P72,"00 P72,"00

Page 7 PROBLEM 11 – TGR C!"&$ 56. D

57. C

5'. C

9radeBin  &une 30, 2015 *ost P157,200  4ccu. dereciation, 1113  63015 (P157,200  20  2.5 %rs.) 7',600 *arr%ing $alue 7',600 9radeBin $alue 12",000 Sale  &an. 1, 2016 *ost P132,000  4ccu. dereciation, 1113  1116 (P132,000  20  3 %rs.) 7",200 *arr%ing $alue 52,'00 !et roceeds 71,250 Sale  =ctoer 1, 2017 *ost P120,000  4ccu. dereciation, 1113  10117 (P120,000  20   "12) 11,000 *arr%ing $alue 6,000 Proceeds 2,000 9otal gain :achine ac8uired on Set. 30, 2013 (P1'0,000 + P6,000) :achine ac8uired on &une 30, 201 (P20,000  "') :achine ac8uired on &une 30, 2016 (list rice) 9otal

P50,00

1',50

1',000 P'6,'50 P1'6,000 235,200 27",000 P700,200

:achine ac8uired on Set. 30, 2013 (P1'6,000  20   312) &une 30, 201 (P235,200  20  3 612) &une 30, 2015 (P27",000  20  2 612)  4ccuulated dereciation, -eceer 31, 2017

P15',100 16,60 13",500 P62,20

5". B -ate o   4c8uisition *ost 112013 P157,200 120,000 132,000 "302013 1'6,000 630201 235,200 6302015 27",000 *orrect dereciation -ereciation er client =$er (under)stateent 60.  A

2013 P31,0 2,000 26,00 ",300 0 0 P"1,10 "7,0 P 6,300

201 P31,0 2,000 26,00 37,200 23,520 0 P12,560 15,752 P 12,1"2

2015 2016 2017 9otal P15,720 P0 P0 P 7',600 2,000 2,000 1',000 11,000 26,00 0 0 7",200 37,200 37,200 37,200 15',100 7,00 7,00 7,00 16,60 27,"00 55,'00 55,'00 13",500 P17',260 P16,00 P15',00 P73,00 153,'02 10',7"1 '2,233 5"7,01' (P 2,5') (P 55,2") (P 75,'07) (P 137,022)

-ereciation eense (2017) @etained earnings (2013  2016)  4ccuulated dereciation

75,'07 61,215 137,022

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