AUDITING PROBLEMS

PROBLEM NO. 1
You are engaged in the regular annual examination o the a!!ount" and re!ord" o PRT#
Manua!turing #o$ or the
%ear ended De!em&er '() *+(*$ To redu!e the ,or-load at %ear end) the !om.an%) u.on
%our re!ommendation)
too- it" annual .h%"i!al in/entor% on No/em&er '+) *+(*$ You o&"er/ed the ta-ing o the
in/entor% and made
te"t" o the in/entor% !ount and the in/entor% re!ord"$
The !om.an%0" in/entor% a!!ount) ,hi!h in!lude" ra, material" and ,or-1in1.ro!e"" i" on
.er.etual &a"i"$
In/entorie" are /alued at !o"t) 2r"t1in) 2r"t1out method$ There i" no 2ni"hed good" in/entor%$
The !om.an%0" .h%"i!al in/entor% re/ealed that the &oo- in/entor% o P()345)43+ ,a"
under"tated &% P67)+++$
To a/oid dela% in !om.leting it" monthl% 2nan!ial "tatement") the !om.an% de!ided not to
ad8u"t the &oo-
in/entor% until %ear1end ex!e.t or o&"olete in/entor% item"$
Your examination di"!lo"ed the ollo,ing inormation regarding the No/em&er '+ in/entor%9
a
$
&
$
!
$
d
$
Pri!ing te"t" "ho,ed that the .h%"i!al in/entor% ,a" o/er"tated &% P3()3++$
An under"tatement o the .h%"i!al in/entor% &% P7)*++ due to error" in ooting"
and exten"ion"$
Dire!t la&or in!luded in the in/entor% amounted to P*6+)+++$ O/erhead ,a"
in!luded at the rate o *++: o
dire!t la&or$ You ha/e a"!ertained that the amount o dire!t la&or ,a" !orre!t
and that the o/erhead rate
,a" .ro.er$
The .h%"i!al in/entor% in!luded o&"olete material" ,ith a total !o"t o P;)+++$
During De!em&er) the
o&"olete material" ,ere ,ritten o< &% a !harge to !o"t o "ale"$
Your audit al"o di"!lo"ed the ollo,ing inormation a&out the De!em&er '(
in/entor%9
a
$
Total de&it" to the ollo,ing a!!ount" during De!em&er ,ere9
#o"t o "ale"
Dire!t la&or
Pur!ha"e"
P()4*+)6++
''6)6++
34()3++
&
$
The !o"t o "ale" o P()4*+)6++ in!luded dire!t la&or o P'63)7++$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) determine the ollo,ing9
(
$
Ad8u"ted amount o .h%"i!al in/entor% at No/em&er '+) *+(*
a$ P();(5)53+
&$ P()3'()53+
!$ P()675);3+
d$ P();**)53+
*
$
Ad8u"ted amount o in/entor% at De!em&er '() *+(*
a. P1,509,760
&$ P()5(3);3+
!$ P()5+*);3+
d$ P()7*5);3+
'
$
#o"t o material" on hand) and material" in!luded in ,or- in .ro!e"" a" o
De!em&er '() *+(*
a$ P6(4)53+
&$ P6(*)53+
!$ P;*6)53+
d$ P47*);3+
7
$
The amount o dire!t la&or in!luded in ,or- in .ro!e"" a" o De!em&er '() *+(*
a$ P3(6)6++
&$ P*'*)7++
!$ P''6)6++
d$ P'63)7++
5
$
The amount o a!tor% o/erhead in!luded in ,or- in .ro!e"" a" o De!em&er '()
*+(*
a$ P ;;*)6++
&$ P()*';)3++
c. P464,800
d$ P;;;)
3
PROBLEM NO. 2
PRT# #om.an%=" .ro.ert%) .lant) and e>ui.ment) a!!umulated
de.re!iation) and amorti?ation &alan!e" at
De!em&er '() *+(( are9
A!!umulated
#o"t de.re!iation
Land P *;5)+++
Building"
Ma!hiner% and
e>ui.ment
Automo&ile and
tru!-"
Lea"ehold
im.ro/ement"
Total"
*)6++)++
+
()'6+)++
+
*(+)++
+
7'*)++
+
P5)+4;)++
+
P 3;*)4++
'3;)5++
((7)'*3
(+6)+++
P()*3*);*3
Additional inormation on de.re!iation) amorti?ation method") and u"eul
li/e" ollo,"9
De.re!iation
A""et
Building"
Ma!hiner% and
e>ui.ment
Automo&ile and
tru!-"
@all a!>uired
ater *++4A
Lea"ehold
im.ro/ement"
method
(5+:1
de!lining1
&alan!e
"traight1
line
(5+:1
de!lining1
&alan!e
"traight1
line
U"eul lie
*5 %ear"$
(+ %ear"
5 %ear"
De.re!iation i" !om.uted to the neare"t month$
Sal/age /alue" o de.re!ia&le a""et" are immaterial ex!e.t or
automo&ile" and tru!-" ,hi!h ha/e e"timated
"al/age /alue" e>ual to (5: o !o"t$
Other additional information:

PRT# entered into a t,el/e1%ear o.erating lea"e "tarting Banuar% () *++4$

The lea"ehold im.ro/ement" ,ere
!om.leted on De!em&er '() *++6 and the a!ilit% ,a" o!!u.ied on Banuar%
() *++4$
On Banuar% 3) *+(*) PRT# !om.leted it" "el1!on"tru!tion o a &uilding on
it" o,n land$ Dire!t !o"t" o
!on"tru!tion ,ere P()+45)+++$ #on"tru!tion o the &uilding re>uired
(5)+++ dire!t la&or hour"$ PRT#="
!on"tru!tion de.artment ha" an o/erhead allo!ation "%"tem or out"ide
8o&" &a"ed on an a!ti/it%
denominator o (++)+++ dire!t la&or hour") &udgeted 2xed !o"t" o
P*)5++)+++) and &udgeted /aria&le !o"t"
o P*; .er dire!t la&or hour$
On Bul% () *+(*) ma!hiner% and e>ui.ment ,ere .ur!ha"ed at a total
in/oi!e !o"t o P'*5)+++$ Additional
!o"t" o P*')+++ to re!ti% damage on deli/er% and P(6)+++ or !on!rete
em&edding o ma!hiner% ,ere
in!urred$ A ,all had to &e demoli"hed to ena&le a large ma!hine to &e
mo/ed into the .lant$ The ,all
demolition !o"t P;)+++) and re&uilding o the ,all !o"t P(4)+++$
On Augu"t '+) *+(*) PRT# .ur!ha"ed a ne, automo&ile !o"ting P*5)+++$
On Se.tem&er '+) *+(*) a tru!- ,ith a !o"t o P76)+++ and a !arr%ing
amount o P'+)+++ on De!em&er '()
*+(( ,a" "old or P*')5++$
On No/em&er 7) *+(*) PRT# .ur!ha"ed a tra!t o land or in/e"tment
.ur.o"e" or P;++)+++$ PRT# thin-" it
might u"e the land a" a .otential uture &uilding "ite$
On De!em&er *+) *+(*) a ma!hine ,ith a !o"t o P(;)+++) a !arr%ing
amount o P*)4;5 on date o di".o"ition)
and a mar-et /alue o P7)+++ ,a" "old to a !or.orate oC!er
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) !om.ute or the ollo,ing
a" o and or the %ear ended
De!em&er '() *+(*9
3
$
Total de.re!iation
a$ P73+)**6
&$ P73*)3;6
!$ P7;+)5*6
d$ P73()5*6
;
$
#arr%ing amount o &uilding"
a$ P')7+4)7;7
&$ P');3()4;7
!$ P')+*6);;7
d$ P')'6()*;7
6
$
#arr%ing amount o ma!hiner% and e>ui.ment
a$ P()(4;)';5
&$ P()(6+)*;5
!$ P()*7')4*5
d$ P()***)+;5
4
$
#arr%ing amount o automo&ile" and tru!-"
a$ P36)7;*
&$ P54)7;*
!$ P3();**
d$ P5*);**
(+$ #arr%ing amount o .ro.ert%) .lant and e>ui.ment
a$ P5)3';)';(
&$ P5)3+6);;(
!$ P5)3(5)5*(
d$ P5)54+)6*(
PROBLEM NO. 3
You noted the ollo,ing item" relati/e to the !om.an%0" Intangi&le a""et"
in !onne!tion ,ith %our audit o the
PRT# #or.oration0" 2nan!ial "tatement" or the %ear *+(*$
Franchise
On Banuar% () *+(*) PRT# "igned an agreement to o.erate a" ran!hi"ee o
#lear #o.% Ser/i!e) In!$ or an initial
ran!hi"e o P36+)+++$ O thi" amount) P*++)+++ ,a" .aid ,hen the
agreement ,a" "igned and the &alan!e ,a"
.a%a&le in our annual .a%ment" o P(*+)+++ ea!h) &eginning Banuar% ()
*+('$ The agreement .ro/ide" that the
do,n .a%ment i" not reunda&le and no uture "er/i!e" are re>uired o the
ran!hi"or$ The im.li!it rate or loan
o thi" t%.e i" (7:$ The agreement al"o .ro/ide" the 5: o the re/enue
rom the ran!hi"e mu"t &e .aid to the
ran!hi"or annuall%$ PRT#0" re/enue rom the ran!hi"e or *+(* ,a"
P6)+++)+++$ PRT# e"timate" the u"eul lie
o the ran!hi"e to &e ten %ear"$
Patent
On Bul% () *+(*) PRT# .ur!ha"ed a .atent rom the in/entor) ,ho a"-ed
P()(++)+++ or it$ PRT# .aid or the
.atent a" ollo,"9 !a"h) P7++)+++D i""uan!e o (+)+++ "hare" o it" o,n
ordinar% "hare") .ar P(+ @mar-et /alue)
P*+ .er "hareAD and a note .a%a&le due at the end o three %ear") a!e
amount) P5++)+++) nonintere"t1&earing$
The !urrent intere"t rate or thi" t%.e o 2nan!ing i" (* .er!ent$ PRT#
e"timate" the u"eul lie o the .atent to &e
ten %ear"$
Trademark
PRT# .ur!ha"ed or P()*++)+++ a trademar- or a /er% "u!!e""ul "ot
drin- it mar-et" under the name POEERF$
The trademar- ,a" determined to ha/e an inde2nite lie$ A !om.etitor
re!entl% introdu!ed a .rodu!t that i" in
dire!t !om.etition ,ith the POEERF .rodu!t) thu" "ugge"ting the need or
an im.airment te"t$ Data gathered &%
the entit% "ugge"t" that the u"eul lie o the trademar- i" "till inde2nite)
&ut the !a"h Go," ex.e!ted to &e
generated &% the trademar- ha/e &een redu!ed either to P7+)+++ .er %ear
@,ith a .ro&a&ilit% o ;+:A or to
P6+)+++ .er %ear @,ith '+: .ro&a&ilit%A$ The a..ro.riate ri"-1ree intere"t
rate i" 5:$ The a..ro.riate ri"-1
ad8u"ted intere"t rate i" (+:
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) determine the ollo,ing9
(Round of resent !alue factors to "
decimal laces#
(($ Total ex.en"e" related to ran!hi"e in *+(*
a$ P5+')4(7
&$ P5'5)*++
!$ P776)45+
d$ P757)437
(*$ #arr%ing amount o ran!hi"e a" o De!em&er '() *+(*
a$ P574)377
&$ P747)36+
!$ P5'6);''
d$ P3(*)+++
('$ #arr%ing amount o .atent a" o De!em&er '() *+(*
a$ P()+75)+++
&$ P 455)4++
!$ P63+)'(+
d$ P4+6)(+5
(7$ Total ex.en"e" related to the intangi&le a""et" in *+(*
a$ P33*);54
&$ P;(();+4
!$ P;'')+3'
d$ P6+*)*(*
(5$ In auditing intangi&le a""et") an auditor mo"t li-el% ,ould re/ie, or
re!om.ute amorti?ation and determine
,hether the amorti?ation .eriod i" rea"ona&le in "u..ort o
management0" 2nan!ial "tatement a""ertion o
a$ Haluation$
&$ Exi"ten!e or
o!!urren!e$
!$ #om.letene""$
d$ Right"$
PROBLEM NO. 4
You are !ondu!ting an audit o the PRT# #om.an% or the %ear ended
De!em&er '() *+(*$ The internal !ontrol
.ro!edure" "urrounding !a"h tran"a!tion" ,ere not ade>uate$ The
&oo--ee.er1!a"hier handle" !a"h re!ei.t")
maintain" a!!ounting re!ord") and .re.are" the monthl% &an-
re!on!iliation"$
The &oo--ee.er1!a"hier .re.ared the ollo,ing re!on!iliation at the end o
the %ear9
Balan!e .er &an-
"tatement
Add9 De.o"it in
tran"it
P(;5)*5
+
P'5+)+++
Note !olle!ted &%
&an-
Total
Le""
out"
tand
ing !he!-"
Balan!e .er general ledger
(5)+++ (4+)*
5+
57+)*
5+
*73);5+
P*4')5++
In the .ro!e"" o %our audit) %ou gathered the ollo,ing9

At De!em&er '() *+(*) the &an- "tatement and general ledger "ho,ed
&alan!e" o P'5+)+++ and P*4')5++)
re".e!ti/el%$
The !ut1o< &an- "tatement "ho,ed a &an- !harge on Banuar% *) *+(' or
P'+)+++ re.re"enting !orre!tion o
an erroneou" &an- !redit$
In!luded in the li"t o out"tanding !he!-" ,ere the ollo,ing9
a
$
&
$
A !he!- .a%a&le to a "u..lier) dated De!em&er *4) *+(*) in the amount
o P(7);5+) relea"ed on Banuar%
5) *+('$
A !he!- re.re"enting ad/an!e .a%ment to a "u..lier in the amount o
P';)*(+) the date o ,hi!h i"
Banuar% 7) *+(') and relea"ed in De!em&er) *+(*$

On De!em&er '() *+(*) the !om.an% re!ei/ed and re!orded !u"tomer0"

.o"tdated !he!- amounting to
P5+)+++
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) an",er the ollo,ing9
(3$ The ad8u"ted de.o"it in tran"it a" at De!em&er '() *+(* i"
a$ P(;5)*5+
&$ P(*5)*5+
!$ P**5)*5+
d$ P(*5)+++
(;$ The ad8u"ted out"tanding !he!-" a" at De!em&er '() *+(* i"
a$ P*46);(+
&$ P*'*)+++
!$ P*+4)57+
d$ P(47);4+
(6$ The ad8u"ted !a"h to &e .re"ented in the "tatement o 2nan!ial
.o"ition at De!em&er '() *+(* i"
a$ P*'5)73+
&$ P*5+)73+
(4$ The !a"h "hortage a" o
De!em&er '() *+(* i"
a$ P75)+++
&$ P56)+7+
!$ P*35)73+
d$ P'(+)73+
!$ P3+)+++
d$ P 6)+7+
*+$ The net ad8u"tment to the !a"h a!!ount a" o De!em&er '() *+(* i"
a$ P7')+7+
&$ P3+)+++
!$ P56)+7+
d$ P75)+++
PROBLEM NO. 5
On Banuar% () *+(*) PRT# #om.an% "old land that originall% !o"t P7++)+++
to Bu%er #om.an%$ A" .a%ment) Bu%er
ga/e PRT# #om.an% a P3++)+++ note$ The note &ear" an intere"t rate o
7: and i" to &e re.aid in three annual
in"tallment" o P*++)+++ @.lu" intere"t on the out"tanding &alan!eA$ The
2r"t .a%ment i" due on De!em&er '()
*+(*$ The mar-et .ri!e o the land i" not relia&l% determina&le$ The
.re/ailing rate o intere"t or note" o thi"
t%.e i" (7: on Banuar% () *+(* and (5: on De!em&er '() *+(*$
PRT# made the ollo,ing 8ournal entrie" in relation to the "ale o land and
the related note re!ei/a&le9
Banuar% () *+(*
Note"
re!ei/a&le
Land
Gain on
"ale o
land
De!em&er '() *+(*
#a"h
Note" re!ei/a&le
Intere"t
in!ome
P3++)+++
P7++)+++
*++)+++
P**7)+++
P*++)+++
*7)+++
PRT# re.orted the note" re!ei/a&le in it" "tatement o 2nan!ial .o"ition at
De!em&er '() *+(* a" .art o trade
and other re!ei/a&le"$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) an",er the ollo,ing9
*($ The !orre!t gain on "ale o land i"
a$ P(+')(+5
&$ P 47)636
**$ Pro2t or *+(* i"
o/er"tated &%
a$ P5+)73+
&$ P'()('+
!$ P(*+)+3(
d$ P*++)+++
!$ P57)4+*
d$ P

*'$ The entit%0" ,or-ing !a.ital at De!em&er '() *+(* i" o/er"tated &%
a$ P*'5);35
&$ P*'*)4'3
!$ P(6*)7;3
d$ P +
*7$ All o the ollo,ing are exam.le" o "u&"tanti/e te"t" to /eri%
/aluation o net a!!ount" re!ei/a&le ex!e.t the
a
$
&
$
!
$
d
$
Re1!om.utation o the allo,an!e or &ad de&t"$
In".e!tion o a!!ount" or !urrent /er"u" non1!urrent "tatu" in the
"tatement o 2nan!ial .o"ition$
In".e!tion o the aging "!hedule and !redit re!ord" o .a"t due
a!!ount"$
#om.ari"on o the allo,an!e or &ad de&t" ,ith .a"t re!ord"$
*5$ #on2rmation) ,hi!h i" a ".e!i2! t%.e o in>uir%) i" the .ro!e"" o
o&taining a re.re"entation o inormation or
o an exi"ting !ondition dire!tl% rom a third .art%$ T,o a""ertion" or
,hi!h !on2rmation o a!!ount"
re!ei/a&le &alan!e" .ro/ide" .rimar% e/iden!e are
a$ #om.letene"" and /aluation
&$ Right" and o&ligation" and exi"ten!e
!$ Haluation and right" and o&ligation"
d$ Exi"ten!e and !om.letene""
PROBLEM NO. 6
You ,ere engaged &% PRT# #or.oration) a "mall and medium1"i?ed entit%)
to audit it" 2nan!ial "tatement" or the
%ear *+(*$ During the !our"e o %our audit) %ou noted the ollo,ing
regarding it" re!ent a!>ui"ition" o
in/e"tment" in e>uit% "e!uritie"9
a
A
On ( Banuar% *+(* the entit% a!>uired *5 .er !ent o the e>uit% o ea!h o
entitie" B) # and D or P(+ million)
P(5 million and P*6 million re".e!ti/el%$ Tran"a!tion !o"t" o ( .er !ent
o the .ur!ha"e .ri!e o the "hare"
,ere in!urred &% the entit%$
&A On * Banuar% *+(* entit% B de!lared and .aid di/idend" o P( million or
the %ear ended *+(($
!
A
On '( De!em&er *+(* entit% # de!lared a di/idend o P6 million or the
%ear ended *+(*$ The di/idend
de!lared &% entit% # ,a" .aid in *+('$
dA Ior the %ear ended '( De!em&er *+(*) entitie" B and # re!ogni?ed
.ro2t o re".e!ti/el% P5 million and P(6
million$ Jo,e/er) entit% D re!ogni?ed a lo"" o P*+ million or that %ear$
eA Pu&li"hed .ri!e >uotation" do not exi"t or the "hare" o entitie" B) #
and D$ U"ing a..ro.riate /aluation
te!hni>ue" the entit% determined the air /alue o it" in/e"tment" in
entitie" B) # and D at '( De!em&er *+(*
a" P(' million) P*4 million and P(5 million re".e!ti/el%$ #o"t" to "ell
are e"timated at 5 .er !ent o the air
/alue o the in/e"tment"$

A
The entit% ha" no "u&"idiarie" and thereore doe" not .rodu!e
!on"olidated 2nan!ial "tatement"$
In a!!ordan!e ,ith "e!tion (7$7 o the PIRS or SME") an in/e"tor "hall
a!!ount or all o it" in/e"tment" in
a""o!iate" u"ing one o the ollo,ing9 @aA the !o"t model in .aragra.h
(7$5) @&A the e>uit% method in .aragra.h
(7$6) or @!A the air /alue model in .aragra.h (7$4$ The entit% i" "ee-ing
%our ad/i!e on the e<e!t o ea!h method
on the !arr%ing amount o the in/e"tment and it" e<e!t on .ro2t or lo""$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) an",er the ollo,ing a" o
and or the %ear ended De!em&er '()
*+(*9
*3$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the !o"t
model) the total !arr%ing amount o the
in/e"tment" "hould &e
a$ P7+$*5 million
&$ P5'$*6 million
!$ P'4$*5 million
d$ P'4$5+ million
*;$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the !o"t
model) the net amount to &e re!ogni?ed in
.ro2t or lo"" "hould &e
a$ P@(($;6A million
&$ P@(*$+'A million
!$ P@(($+'A million
d$ P *$*5 millio
n
*6$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the e>uit%
method) the total !arr%ing amount o the
in/e"tment" "hould &e
a$ P5*$+' million
&$ P7'$++ million
!$ P7*$;5 million
d$ P7'$;5 million
*4$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the e>uit%
method) the net amount to &e re!ogni?ed
in .ro2t or lo"" "hould &e
a$ P@6$*6A million
&$ P@6$5'A million
!$ P@;$5'A million
d$ P+$;5 million
'+$ I the entit% mea"ure" it" in/e"tment" in a""o!iate" u"ing the air /alue
model) the net amount to &e
re!ogni?ed in .ro2t or lo"" "hould &e
a$ P5$;* million
&$ P5$7; million
!$ P*$6; million
d$ P7$++ million
PROBLEM NO. 7
PRT# #or.oration i" "elling audio and /ideo a..lian!e"$ The !om.an%0"
2"!al %ear end" on Mar!h '($ The
ollo,ing inormation relate" to the o&ligation" o the !om.an% a" o Mar!h
'() *+(*9
Note" .a%a&le
PRT# ha" "igned "e/eral note" ,ith 2nan!ial in"titution"$ The maturitie" o
the"e note" are gi/en &elo,$ The total
un.aid intere"t or all o the"e note" amount" to P'7+)+++ on Mar!h '()
*+(*$
Due date
A.ril '() *+(*
Bul% '() *+(*
Ie&ruar% () *+('
A.ril '+) *+('
Bune '+) *+('
Amount
P ;++)+++
4++)+++
6++)+++
()*++)+++
()5++)+++
P 5)(++)+++
E"timated ,arrantie"
PRT# ha" a one1%ear .rodu!t ,arrant% on "ome "ele!ted item"$ The
e"timated ,arrant% lia&ilit% on "ale" made
during the *+(+ K *+(( 2"!al %ear and "till out"tanding a" o Mar!h '()
*+(() amounted to P*5*)+++$ The
,arrant% !o"t" on "ale" made rom A.ril () *+(( to Mar!h '() *+(*) are
e"timated at P3'+)+++$ The a!tual
,arrant% !o"t" in!urred during *+(( K *+(* 2"!al %ear are a" ollo,"9
Earrant% !laim" honored on
*+(+ K *+(( "ale"
Earrant% !laim"
honored on
*+(( K *+(* "ale"
Total
P *5*)+++
*65)+++
P 5';)+++
Trade .a%a&le"
A!!ount" .a%a&le or "u..lie") good") and "er/i!e" .ur!ha"e" on o.en
a!!ount amount to P53+)+++ a" o Mar!h
'() *+(*$
Di/idend"
On Mar!h (+) *+(*) PRT#0" &oard o dire!tor" de!lared a !a"h di/idend o
P+$'+ .er ordinar% "hare and a (+:
ordinar% "hare di/idend$ Both di/idend" ,ere to &e di"tri&uted on A.ril 5)
*+(* to ordinar% "hareholder" on
re!ord at the !lo"e o &u"ine"" on Mar!h '() *+(*$ A" o Mar!h '() *+(*)
PRT# ha" 5 million) P* .ar /alue)
ordinar% "hare" i""ued and out"tanding$
Bond" .a%a&le
PRT# i""ued P5)+++)+++) (*: &ond") on O!to&er () *++3 at 43$ The &ond"
,ill mature on O!to&er () *+(3$
Intere"t i" .aid "emi1annuall% on O!to&er ( and A.ril ($ PRT# u"e" the
"traight line method to amorti?e &ond
di"!oun
t
QUESTIONS:
Ba"ed on the oregoing inormation) determine the ad8u"ted &alan!e" o
the ollo,ing a" o Mar!h '() *+(*9
'($ E"timated ,arrant% .a%a&le
a$ P*5*)+++
&$ P'75)+++
'*$ Unamorti?ed &ond
di"!ount
a$ P((+)+++
&$ P(++)+++
''$ Bond intere"t .a%a&le
!$ P3'+)+++
d$ P66*)+++
!$ P*++)+++
d$ P 4+)+++
a$
P
0 !$ P(5+)+++
&$ P'++)+++
'7$ Total !urrent lia&ilitie"
a$ P3)775)+++
&$ P5)(+5)+++
'5$ Total non!urrent
lia&ilitie"
a$ P;);++)+++
&$ P;)5++)+++
d$ P*5+)+++
!$ P5)775)+++
d$ P')475)+++
!$ P;)54+)+++
d$ P;)3(+)+++
PROBLEM NO. 8
The "hareholder"0 e>uit% "e!tion o the PRT# #or.oration0" "tatement o
2nan!ial .o"ition a" o De!em&er '()
*+(( i" .re"ented &elo,9
(*: Preeren!e "hare !a.ital)
P(++ .ar
Ordinar% "hare !a.ital) P*+
.ar
Share .remium K .reeren!e
Share .remium K ordinar%
Share .remium K trea"ur%
"hare"
Retained earning"
Total "hareholder"0 e>uit%
P *;+)+++
()546)7++
'3)6++
*'5)*++
')*++
()565)67+
P');*4)77+
PRT# had 35)+++ ordinar% "hare" a" De!em&er '() *+(+$
The ollo,ing "hareholder"0 e>uit% tran"a!tion" ,ere re!orded in *+(( and
*+(*9
*+((
Ma% (
Bul% (
Bul$ '(
Aug$ '+
De!$ '(
-
-
-
-
-
Sold 4)+++ ordinar% "hare" or P*7) .ar
/alue P*+$
Sold ;++ .reeren!e "hare" or P(*7) .ar
/alue P(++$
I""ued an 6: "hare di/idend on ordinar%
"hare"$ The mar-et /alue o ordinar%
"hare ,a" P'+ .er "hare$
De!lared !a"h di/idend" o (*: on
.reeren!e "hare" and P' .er "hare on
ordinar% "hare"$
Pro2t or the %ear amounted to
P()'75)+7+$
*+(*
Ie&$ (
Ma% (
Ma% '(
-
-
-
Sold *)*++ ordinar% "hare" or P'+$
Sold 3++ .reeren!e "hare" or P(*6$
I""ued a *1or1( ".lit o ordinar% "hare"$
The .ar /alue o the ordinar% "hare ,a
"
*+(*
redu!ed to P(+ .er "hare$
Se.$ (
O!t$ (
No/$ (
De!$ '(
-
-
-
-
Pur!ha"ed ()+++ ordinar% "hare" or P(6
to &e held a" trea"ur% "hare"$
De!lared and .aid !a"h di/idend" o (*:
on .reeren!e "hare" and P7 .er "hare on
ordinar% "hare"$
Sold ()+++ "hare" o trea"ur% "hare" or
P**$
Pro2t or the %ear amounted to P44()5*+$
QUESTIONS:
Determine the amount") a" re>uired) in PRT# #or.oration0" !om.arati/e
2nan!ial "tatement" a" o and or the
%ear" ended De!em&er '() *+(( and *+(*$
'3$ Di/idend" .aid to ordinar% "hareholder" in *+(*
a$ P35*)34+
&$ P34*)53+
!$ P35*)43+
d$ P353)43+
';$ Retained earning" a" o De!em&er '() *+(*
a$ P()66+)6++
&$ P()667)6++
'6$ Total e>uit% a" o
De!em&er '() *+(*
a$ P7)(;5)*++
&$ P7)(;()*++
'4$ Ba"i! earning" .er
"hare or *+((
a$ P(;$(*
&$ P 6$*(
7+$ Ba"i! earning" .er
"hare or *+(*
a$ P;$7+
&$ P;$'7
!$ P()64*)+++
d$ P()666)+++
!$ P7)(6*)7++
d$ P7)(5;)*++
!$ P 6$53
d$ P(6$74
!$ P5$63
d$ P5$6(
PROBLEM NO. 9
PRT# #or.oration) a non.u&li! entit%) ,a" in!or.orated on De!em&er ()
*+(() and &egan o.eration" one ,ee-
late !lo"ing the &oo-" or the 2"!al %ear ended No/em&er '+) *+(*) the
!ontroller .re.ared the ollo,ing 2nan!ial
"tatement"9
PRT# #or.oration
Statement o Iinan!ial Po"ition
No/em&er '+) *+(*
A""et"
#urrent a""et"9
#a"h
Mar-eta&le "e!uritie"
) at !o"t
A!!ount" re!ei/a&le
Allo,an!e or
dou&tul a!!ount"
In/entorie"
Pre.aid in"uran!e
Total !urrent a""et"
Pro.ert%) .lant and
e>ui.ment
Le"" a!!umulated
de.re!iation
Pro.ert%) .lant and
e>ui.ment) net
Re"ear!h and
de/elo.ment !o"t"
Total a""et"
P (5+)+++
3+)+++
75+)+++
@ 54)+++A
7'+)+++
LL(5)+++
()+73)+++
7*3)+++
@ 7+)+++A
'63)+++
(*+)+++
P()55*)++
+
Lia&ilitie" and Shareholder"= e>uit%
#urrent lia&ilitie"9
A!!ount" .a%a&le
and a!!rued
ex.en"e"
In!ome taxe"
.a%a&le
Total !urrent
lia&ilitie"
Shareholder"= e>uit%9
Share !a.ital) P(+
.ar /alue
Retained earning"
Total "hareholder"=
e>uit%
Total lia&ilitie" and
"hareholder"= e>uit%
P 54*)+++
**7)+++
6(3)+++
7++)+++
''3)+++
;'3)+++
P()55*)+++
PRT# #or.oration
Statement o In!ome
Ior the Ii"!al Year Ended No/em&er '+) *+(*
Net "ale"
O.erating ex.en"e"9
#o"t o "ale"
Selling and
admini"trati/e
De.re!iation
Re"ear!h and
de/elo.ment
In!ome &eore
in!ome taxe"
Pro/i"ion or in!ome
taxe"
Net in!ome
P*)45+)+++
()3;+)+++
35+)+++
7+)+++
'+)+++
*)'4+)+++
53+)+++
**7 +++
P ''3)+++
PRT# i" in the .ro!e"" o negotiating a loan or ex.an"ion .ur.o"e") and
the &an- ha" re>ue"ted audited 2nan!ial
"tatement"$ During the !our"e o the audit) the ollo,ing additional
inormation ,a" o&tained9
a
$
&$
!$
d
$
e
$

$
g
$
h
$
i
$
The in/e"tment .ortolio !on"i"t" o "hort1term in/e"tment" in mar-eta&le
e>uit% "e!uritie" ,ith a total
mar-et /aluation o P55)+++ a" o No/em&er '+) *+(*$
Ba"ed on an aging o the a!!ount" re!ei/a&le a" o No/em&er '+) *+(*) it
,a" e"timated that P'3)+++ o the
re!ei/a&le" ,ill &e un!olle!ti&le$
In/entorie" at No/em&er '+) *+(* did not in!lude ,or- in .ro!e""
in/entor% !o"ting P(*)+++) "ent to an
out"ide .ro!e""or on No/em&er *4) *+(*$
A P')+++ in"uran!e .remium .aid on No/em&er '+) *+(* on a .oli!%
ex.iring one %ear later ,a" !harged to
in"uran!e ex.en"e$
PRT# ado.ted a .en"ion .lan on Bune () *+(* or eligi&le em.lo%ee" to &e
admini"tered &% a tru"tee$ Ba"ed
u.on a!tuarial !om.utation") the 2r"t t,el/e month"= normal .en"ion ,a"
e"timated at P75)+++$
On Bune () *+(*) a .rodu!tion ma!hine .ur!ha"ed or P*7)+++ ,a"
!harged to re.air" and maintenan!e$
PRT# de.re!iate" ma!hine" o thi" t%.e on the "traight1line method o/er a
2/e1%ear lie ,ith no "al/age /alue)
or 2nan!ial and tax .ur.o"e"$
Re"ear!h and de/elo.ment !o"t" o P(5+)+++ ,ere in!urred the
de/elo.ment o a .atent) ,hi!h PRT#
ex.e!t" to &e granted during the 2"!al %ear ending No/em&er '+) *+('$
PRT# initiated a 2/e1%ear
amorti?ation o the P(5+)+++ total !o"t during the 2"!al %ear ended
No/em&er '+) *+(*$
During De!em&er *+(*) a !om.etitor !om.an% 2led "uit again"t PRT# or
.atent inringement !laiming
P*++)+++ damage"$ PRT#=" legal !oun"el &elie/e" that an una/ora&le
out!ome i" .ro&a&le$ A rea"ona&le
e"timate o the !ourt=" a,ard to the .lainti< i" P5+)+++$
The 7+: e<e!ti/e tax rate ,a" determined to &e a..ro.riate or
!al!ulating the .ro/i"ion or in!ome taxe"
or the 2"!al %ear ended No/em&er '+) *+(*$ Ignore !om.utation o the
deerred .ortion o in!ome taxe"
$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) determine the ollo,ing
a" o and or the 2"!al .eriod ended
No/em&er '+) *+(*9
7($ Net in!ome
a$ P*5')*3+
&$ P*6')*3+
7*$ #urrent a""et"
a$ P()+67)+++
&$ P()+3()+++
7'$ Total a""et"
a$ P()767)*++
&$ P()763)3++
77$ Total lia&ilitie"
a$ P6'')'7+
&$ P;6')'7+
75$ Total e>uit%
a$ P36')*3+
&$ P3'5)*3+
!$ P*'5)*3+
d$ P*'4);3+
!$ P()+;4)+++
d$ P()+;')+++
!$ P()764)*++
d$ P()74()3++
!$ P655)67+
d$ P6+5)67+
!$ P3'4);3+
d$ P35')*3+
PROBLEM NO. 10
PRT#) In!$) a non.u&li! enter.ri"e) i" negotiating a loan or ex.an"ion
.ur.o"e" and the &an- re>uire" audited
2nan!ial "tatement"$ Beore !lo"ing the a!!ounting re!ord" or the %ear
ended De!em&er '() *+(*) PRT#="
!ontroller .re.ared the ollo,ing !om.arati/e 2nan!ial "tatement" or
*+(* and *+((9
PRT#) In!$
Statement" o Iinan!ial Po"ition
De!em&er '() *+(* and *+((
A""et"
*+(* *+((
#a"h
Trading "e!uritie"
A!!ount" re!ei/a&le
Allo,$ or dou&tul
a!!ount"
In/entorie"
Pro.ert% and
e>ui.ment
A
!!
u
m
ul
at
e
d
de.re!iation
Total a""et"
Lia&ilitie" and E>uit%
A!!ount" .a%a&le and a!!rued
lia&ilitie"
E"timated lia&ilit% rom la,"uit
Share !a.ital) P(+ .ar
Share .remium
Retained earning"
Total lia&ilitie" and
e>uit%
P
*;5)+++
;6)++
+
76;)++
+
@5+)++
+A
7*5)++
+
'(+)++
+
@(5+)++
+A
P()';5)+
++
P
7*+)+++
(++)++
+
*3+)++
+
('+)++
+
735)++
+
P()';5)+
++
P(5+)+++
;6)+++
'4*)+++
@'*)+++A
'+;)+++
*(;)+++
@(*()+++A
P 44()+++
P'7;)+++
-
*3+)+++
('+)+++
*57)+++
P 44()++
+
PRT#) In!$
In!ome Statement"
Ior the Year" Ended De!em&er '() *+(* and
*+((
*
+
(
*
*+((
Net "ale"
O.erating
ex.en"e"9
#o"t o "ale"
Selling and
admin$
De.re!iation
E"t$ lo"" rom
la,"uit
Pro2t
P()56+)+
++
P
;55)+++
765)++
+
*4)++
+
(++)++
+
P()'34)+
++
P
*(()+++
P()*5+)+++
P 34+)+++
'35)+++
(6)+++
-
P()+;')+++
P (;;)+++
During the !our"e o the audit) the ollo,ing additional inormation ,a"
o&tained9
a
$
&
$
!
$
d
$
e
$

$
g$
The
trading
"e!uritie"
,ere
a!>uired
on
De!em&er
'() *+(($
The
"e!uritie"
ha/e a air
/alue o
P3;)+++
at
De!em&er
'() *+(*$
In
di"!u""ion
,ith the
!om.an%
oC!ial") it
,a"
determine
d that the
dou&tul
a!!ount"
ex.en"e
rate
&a"ed on
net "ale" "hould &e redu!ed to *: rom ':) e<e!ti/e Banuar% () *+(*$
A" a re"ult o error" in the .h%"i!al !ount) in/entorie" ,ere o/er"tated &%
P(*)+++ at De!em&er '() *+(( and
&% P(;)5++ at De!em&er '() *+(*$
On Banuar% () *+(() the !o"t o e>ui.ment .ur!ha"ed or P'+)+++ ,a"
de&ited to re.air" and maintenan!e$
PRT# de.re!iate" e>ui.ment o thi" t%.e &% the "traight1line method o/er
a 2/e1%ear lie ,ith no re"idual
/alue$
On Bul% () *+(*) ull% de.re!iated e>ui.ment .ur!ha"ed or P*()+++) ,a"
"old a" "!ra. or P*)5++$ The onl%
entr% PRT# made ,a" to de&it !a"h and !redit .ro.ert% and e>ui.ment or
the "!ra. .ro!eed"$ The .ro.ert%
and e>ui.ment @netA had a !urrent !o"t o P*5+)+++ at De!em&er '()
*+(*$
Ad/erti"ing and .romotion ex.en"e or the %ear ended De!em&er '() *+((
in!lude" the P*5)+++ !o"t o
.rinting "ale" !atalog" or a ".e!ial .romotional !am.aign held in Banuar%
*+(*$
PRT# ,a" named a" a deendant in a la,"uit in O!to&er *+(*$ PRT#="
!oun"el i" o the o.inion that PRT# ha"
a good deen"e) and doe" not anti!i.ate an% im.airment o PRT#="
a""et" or that an% "igni2!ant lia&ilit% ,ill
&e in!urred$ Ne/erthele"") PRT#0" management ,i"hed to &e
!on"er/ati/e and) thereore) e"ta&li"hed a lo""
!ontingen!% o P(++)+++ at De!em&er '() *+(*$
QUESTIONS:
Ba"ed on the a&o/e and the re"ult o %our audit) !om.ute or the
ollo,ing9 ($isre%ard income ta&es#
73$ Ad8u"ted retained earning" a" o Banuar% () *+(*
a$ P*33)+++
&$ P*4;)+++
!$ P*65)+++
d$ P*4()+++
7;$ Ad8u"ted .ro2t or the %ear ended De!em&er '() *+(*
a$ P*6()6++
&$ P(6()6++
!$ P*6;)6++
d$ P'+3)6++
76$ Ad8u"ted !urrent a""et" a" o De!em&er '() *+(*
a$ P()**3);3+
&$ P()(4+)'++
!$ P()(57)4++
d$ P()*+*)'++
74$ Ad8u"ted !arr%ing amount o .ro.ert% and e>ui.ment a" o De!em&er
'() *+(*
a$ P(36)5++
&$ P(6+)5++
!$ P(;6)+++
d$ P(4*)5++
5+$ Ad8u"ted "hareholder"0 e>uit% a" o De!em&er '() *+(*
a$ P43*)6++ &$ P45+)6++
!$ P4;7)6++ d$ P63*)6++