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a, ROSA AUDITING PROBLEM ‘The Raview School of Accountancy IRENEO/ESPENILLA/JAMES. RSH wel. No. 735-9807 & 734-3989 MSHTNGBnouea PREWEEK MATERIALS: Contents Problem 1 ~ 5: SFP and SCI Problem 6: Error Correction ‘ Problem 7 - 9: Cash-accrual/Single-entry; Cash Flow Statement Problem 10 = 12: Audit of Cash Problem 13 ~ 15: Audit of Receivables Problem 16 ~ 19: Audit of Inventories Problem 20: Audit of Current Assets Problem2i - 25: Audit of Investments Problem 26 ~ 29: Audit of PPE Problem 30 - 34: Audit of Intangibles Problem 35 - 37: Audit of Liabilities Problem 38 - 43: Audit of SHE PROBLEM 2 ‘The following information were made available to you by RCW Corp. In relation to your audit ofits financiat mber 31, 2014: _ ‘Allowance for doubtful accounts or ee Inventories at cost (Net realizable Vive 15 P900,000) ‘Land, piant sit ‘Accounts payal are Income tax payable | Accrued expenses, ‘Mortgage payable 3,000,000 Estimated habulty = ne 140,000. “Retained earnings appropriated for plant expansion = F'000;000 Retained earnings appropriated for “100,000. "share capital 7 “| 3000/6000 [Share prervurn ~~ ae == 300;000 tamed earnings, unapprép 7,350,000 150,000 "200,000. 500,000, 100, ‘Audit Notes: The land held for speculation purposes was acquired in 2013 at a cost of P1,000,000. The company elected to use the fair value valuation approach in measuring investment properties. b. On December 31, 2014, the company entered into an agreement with the bank to extend the maturity of the loan for another year from the original maturity date, that is upto June 30, 2016. Cy 1. Wnat is the total current assets to be reported in the 2014 statement of financial position? Hl D 'b. 2,250,000 d. 2,100,000 5 2. What is the total non-current assets to be reported in the 2014 statement of financial 2 i D %, Wit Oh 71.000 ‘elton Seb d@. 7,400,000 a. 1,240,000 c. 1,550,000 aon 1 D+ vont sms tone reper 9s wa ‘1,600,000 eee ane doo! Statement of financial position? 3 LB 5 toast teeny 0m onde 5. total stock rs! equi reported in the 2014 ine i 'b. 5,650,000 da. a dine be Presented below Is the unaudited statement of financial position of ETT Inc. on December 31, 2014: ‘Current Assets (Note 1) 8,000,000 Current Liabilties (Note 2) 3,000,000 Working Capital 5,000,000 Other Assets (Note 3) —3,600,000_ Total P8,600,000 Other Liabilities (Note 4) "700,000, Net Assets (Note 5) TBij300,000- Audit notes: 1. An analysis of the current assets revealed the following composition: Cash in bank 800,000 ‘Accounts receivable - trade 1,600,000 Notes receivable - trade 300,000 Financial asset at fair value through profits/losses 00,0 Money market placements 500,000 Inventories, 2,600,000 Goodwill 4/400,000 v 0 d A 0 2. The cash in bank balance is net of a P200,000 bank overdraft with a bank where there are NO ‘other existing accounts. b. P800,000 of the accounts receivable Is 1-60 days old and are 5% uncollectible; P500,000 is 61- 120 days old and are 20% uncollectible, and; P300,000 is more than 120 days past due and are 40% uncollectibie. © The financial asset represent the cost of acquisition of 5% interest of TEL Cos Issued and Outstanding shares, These shares had fair value of P950,000.0n December 31, 2014. 4. The money market placements were acquired on November 1, 2014 and shall mature on Janaury 31, 2015 €. Inventories had an estimated selling price of P2,800,000 with an estimated cost to sell at 300,000. combination at the beginning of 2014. 2. Current liabilities represented balances that were payable to trade creditors. It was further ascertained that PS00,000 accrued salaries at year-end hag not been recognized yet. 3. The total of other assets was determined as follows: Land and building (acquisition cost, January 1, 2013) P8,000,000 * =r Less: Mortgage payable, due December 31, 2017 4,400,000) Balance 3,600,000. ‘a. It was ascertained that at the time of purchase, the land was worth P2,000,000. . , The building was estimated to have a useful life of 20 years. Depreciation is yet to be provided for building from date of acquisition. c. The mortage payable balance inicuded accrued interest on December 31, 2014 at 400,000. Annual interest on mortgage is payable every January 1. 4. Other liabilities consisted of current tax liability and deferred tax liability at P200,000 and 500,000, respectively. 5. The entity originally drganized in 2013 when $0,000 ordinary shares with par value of P100 were Issued at P110 per share. Requirements: 1. What is the total current assets to be reported in the 2014 statement of financial position? Ya: 6,590,000 ¢. 7,390,000 b. 6,730,000 4. 7,730,000 2. What is the total non-current assets to be reported in the 2014 statement of financial position? ‘a. 8,400,000 + ¥c, 8,800,000 b, 8,660,000 4. 8,200,000 3, What Is the total current liabilities to be reported in the 2014 statement of financial position? a, 3,800,000 ~e, 4,100,000 b, 4,000,000 +4, 4,300,000 4. What Is the total non-current liabilities to be reported in the 2014 statement of financial position? none © 4,200,000 b. 4,000,000 Yd. 4,500,000 5. What Is the total stockholders’ equity to be reported in the 2014 statement of financial position ? Ya. 6,580,000 7,030,000 b. 6,450,000 4. 11,390,000 6. What is the correct accumulated profits to be reported in the 2014statement of financial position? one ¢. 1,090,000 ‘b. 950,000 " > @. 1{250,000 f. The goodwill resulted from the purchase of the competitors’ net assets through @ business | f ee es RaSA: The Review Schoo! of Accountancy sax Pete her 34, 2014 SCR Company provided the folowing information on December 34, v 200,008 rent asets ‘ther Assets 11/800, 000, Fotal Assets ane 18,000,000 ‘Current Liabilities — _]-— 2,000,000 | tong term oe a Captter ~ #4000 000 | (ett abies 38a Capital] isvon0.000 Ait notes 2. “Current asset nce the flowing es | ash (rising P400,dRD nested fo moe market nse |” P2EDH.050 | and restricted foreign deposit of P00, 0 Land held for undetermined use, at acquisition cost | lair vatue, ts at PI, 200,000, the company opted to use the | cost model to account for such property) 1000,000 | { Accounts recenvabie net of an allowance of 100,000 1,400,000 Linventones at cost (NRW Is at P1,000,( fA a | 1,200,000 1 SGN Cony te opel “600000 | Total ——_ —2 % 200,000 . Other assets include the following: 4 i [store supplies 100,000 | “Buiing tess accumulated deprecation of P1,000,000 "~~ 6,000,000 | [Equipment less accumulated depreciation of P500,000 _1,500,000 cal ase amore t= He alrty 1/200:000, feat oe though profi or losses “490,000, Liredemark = 600/00 300,000 a $00,600 800,009 = 1 an,s00,0e ‘Accounts payable me L P1,000,000 | Notes poyabe, due Gedeinbar 31,2015 200,000 Income toe payable Soc.000 | Share prema si : 300,005 Lomi = 2,000,005 4. Long-term fobiities mclude ‘Unearned leasehold income (live years storing 2015) 1 #700;000 | sock cided payee = 2000 [Serial bonds payable (P100,000 ‘maturing annually) “T= 1,000,000 Cota 7 = pploao;o00 Capital ches: Taetned earings a ~P3,000,000 | [Share capttal, P100 par _ 10,000,000 | | Retained earnings appropriated for pl Total 7 Requirements: 1. "What isthe total current assets to be reported in the 2014 statement of financial position? Ya"4.700,000 © $400,000 nye nn rosa ». 4/900,000 4. 5,500,000 = { 2-_what i the total non-current assets tobe reported inthe 2014 statement of Financial positon? ‘a. 11,900, . 12,600, ma om 8 11550000 &, 12,700,000 © ea 3. What he tts) current habltes to be reported inthe 2014 statement of nancial position? . 1,740,0% ®._1:709,000 Si Zouclen SM ° ere ‘4 whet is the total non-currentlabiltes to be reported in the 2014 statement of fi ‘2. 1,600,000 © 1,460,000 5, 'nancial position? b. 1,700,000 4. 1,400,000 22 EME cme ‘5. What is the total stockholders’, in the 20 2 200,099 SO SY ee era cna MeN nancial poston 7 ®. 14,000,000 @.14,800'000 cue Mew