NATIONAL COLLEGE OF BUSINESS AND ARTS

Cubao-Fairview-Taytay
SECOND SEM. SY 2016-2017
FINAL DEPARTMENTAL EXAMINATIONS 3 HRS
ACCOUNTING 14-07 APPLIED AUDITING

INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for
each item by shading the corresponding letter of your choice on the answer sheet provided. STRICTLY NO
ERASURES ALLOWED. Use Pencil No. 2 only.

1. Refusal by a client to prepare and sign the representation letter would require a(n)
a. Qualified opinion or a disclaimer
b. Adverse opinion or disclaimer
c. Qualified or an adverse opinion
d. Unqualified opinion with an explanatory paragraph

2. Although there is no professional requirement to do so on audit engagements, CPAs normally issue a

formal “management” letter to their clients. The primary purpose of this letter is to provide
a. Evidence indicating whether the auditor is reasonably certain that internal accounting control
is operating as prescribed.
b. A permanent record of the internal accounting control work performed by the auditor during
the course of the engagement.
c. A written record of discussions between auditor and client concerning the auditor’s
observations and suggestions for improvements.
d. A summary of the auditor’s observations that resulted from the auditor’s special study of
internal control.

Use the following to answer questions 3-5:

Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and 4, of a client for
late December 2016 and early January 2017:

Bank Account One Disbursing Date Bank Account Two Receiving Data
(Month/Day) (Month/Day)
Per Bank Per Books Per Bank Per Books
1. December 31 December 30 December 31 December 30
2. January 2 December 30 December 31 December 31
3. January 3 December 31 January 2 January 2
4. January 3 December 31 January 2 December 31

3. Based on the schedule of interbank transfers above, which of the cash transfers indicates an error in
cash cutoff at December 31, 2016?
a. 1 c. 3
b. 2 d. 4

4. Based on the schedule of interbank transfers above, which of the cash transfers would appear as a
deposit in transit on the December 31, 2016 bank reconciliation?
a. 1 c. 3
b. 2 d. 4

5. Based on the schedule of interbank transfers above, which of the cash transfers would not appear as
an outstanding check on the December 31, 2016 bank reconciliation?
a. 1 c. 3
b. 2 d. 4

6. During an examination, the auditor learns that the client was granted a three-month waiver of the
repayment of principal on the installment loan with a local bank without an extension of the maturity
date. With respect to this loan, the audit program used by the auditor would be least likely to include a
verification of
a. Interest expense for the year
b. Balloon payment
c. Total liability at year-end
d. Installment loan payments
2ACCOUNTING 14 - 07 APPLIED AUDITING

Use the following to answer questions 7-11:

Peterson Inc. reported the following amounts in the shareholders’ equity section of its December
31, 2016, balance sheet:
Preference shares, P10 par (100,000 shares authorized, 40,000 shares issued) P400,000
The
Ordinary shares, P5 par (50,000 shares authorized, 20,000 shares issued) 100,000
Share premium – PS 112,000
Share premium – OS 80,000
Accumulated profits 1,200,000
following transactions occurred during 2017:
 Paid the annual 2016 P1 per share dividend on preference shares and P0.50 per share
dividend on Ordinary shares. No entry had been made by the client upon the declaration of
these dividends on December 29, 2016.
 Purchased 4,000 shares of its own outstanding ordinary shares for P80,000.
 Declared a 4 for 1 reverse share split on its ordinary shares.
 Reissued 350 treasury shares for an equipment with a fair value at P50,000.
 Issued 10,000 shares of preference shares at P15 per share.
 Declared a 10% stock dividend on the outstanding ordinary shares when the stock is selling
for P48 per share.
 Issued the share dividend.
 Retired 150 ordinary shares in the treasury.
 Declared the annual P1 dividend on preference shares and the P2 per share dividend on
ordinary shares. These dividends are payable in 2018.
 Registered a net income for 2017 at P940,000.

Determine the adjusted balances of the following accounts:

7. Preference shares
a. P400,000
b. P500,000
c. P550,000
d. P750,000

8. Ordinary shares
a. P100,000
b. P105,700
c. P108,700
d. P120,880

9. Share premium – treasury shares

a. P22,000
b. P15,400
c. P6,600
d. P0

10. Treasury shares

a. P13,000
b. P52,000
c. P40,000
d. P80,000

11. Retained earnings – unappropriated

a. P1,969,550
b. P2,009,550
c. P2,029,550
d. P2,292,430

12. Assume that the client’s valuation of an inventory item is P10 per unit for 1,000 unitsusing LIFO. If the
most recent acquisition of a layer of inventory was for 600 units at P10 per unit and the immediately
preceding layer was for 700 units at P9 per unit, the inventory item is in error and it is
a. Understated P700
b. Understated P300
c. Overstated P400
d. Overstated P700

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Use the following to answer questions 13-17:

On January 1, 2016, Madison Corporation issued bonds with a face value of P1,000,000 and a
maturity date of December 31, 2025. The bonds pay interest of 10%, payable on January 1 and
July 1 of each year. The bonds were sold for P915,300. Madison paid P30,000 to issue the
bonds.

13. What is the effective interest rate on this bond?

a. 10% c. 12%
b. 11% d. 13%

14. The total bond interest expense for the year 2016 is
a. P92,426 c. P104,673
b. P93,577 d. P106,423

15. Determine the carrying amount of bonds payable as of December 31, 2017.
a. P891,723 c. P898,939
b. P895,226 d. P1,000,000

16. The unamortized bond discount on December 31, 2018 is

a. P92,953 c. P104,774
b. P101,061 d. P114,700

17. Assuming that the bonds were reacquired on January 1, 2017 at 90, how much is the gain or loss that
should be recognized in the income statement?
a. P1,061 gain c. P8,277 gain
b. P1,061 loss d. P8,277 loss

18. A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the
auditor is unable to count the securities at the balance sheet date, the auditor most likely will
a. Count the securities at a subsequent date and confirm with the bank that there has been no
access to the box since the balance sheet date.
b. Request the bank to confirm to the auditor the contents of the safe deposit box at the balance
sheet date.
c. Examine supporting evidence for transactions occurring during the year.
d. Count the securities at a subsequent date and confirm with the bank whether securities were
added or removed since the balance sheet date.

19. An auditor must obtain written client representations that normally should be signed by
a. The treasurer and the internal auditor
b. The president and the chairperson of the board
c. The chief executive officer and the chief financial officer
d. The corporate counsel and the audit committee chairperson

Use the following to answer questions 20-23:

As a member of the audit team responsible for the audit of Melbourne Company’s financial
statements for the year 2015, you were assigned to perform cut-off test for the beginning and
ending inventory balances of the Company to be able to verify the cost of goods sold and
inventory reported in the financial statements.

In the course of your examination, the following facts were discovered:

December 31, 2014

 Invoices totaling P18,000 were entered in the voucher register in January, but the goods were
received in December.
 December invoices totaling P16,000 were entered in the voucher register in December, but
the goods were not received until January

December 31, 2015

 Sales of P10,000 were made on account at December 31 and the goods were delivered at
that time but the sale was recorded in January.
 Invoices totaling P12,000 for goods received in December were entered in the voucher
register in January.

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 December invoices totaling P4,000 were entered in the voucher register in December, but the
goods were not received until January.
 Invoices totaling P2,000 were entered in the voucher register in January, and the goods were
received in January. However, upon examination of these invoices, you determined that these
are all dated December.

Compute the net effect of the above errors on the following 2016 accounts:
20. Sales
a. P10,000 overstated c. P14,000 overstated
b. P10,000 understated d. P14,000 understated

21. Ending inventory

a. P18,000 overstated c. P8,000 understated
b. P18,000 understated d. P6,000 understated

22. Accounts payable

a. P18,000 overstated c. P14,000 understated
b. P18,000 understated d. P14,000 overstated

23. Cost of goods sold

a. P6,000 overstated c. P24,000 overstated
b. P24,000 understated d. P6,000 understated

24. To conceal defalcation involving receivables, the auditor would expect an experienced bookkeeper to
charge which of the following accounts?
a. Miscellaneous income c. Miscellaneous expense
b. Petty cash d. Sales returns

25. Customers having substantial year-end past due balances fail to reply after second request forms
have been mailed directly to them. Which of the following is the most appropriate audit procedure?
a. Examine shipping documents
b. Increase the balance in the accounts receivable allowance (contra) account
c. Review collections during the year being examined
d. Intensify the study of the client’s system of internal control with respect to receivables.

26. Which of the following statements is correct?

Statement I - At the completion of the audit, management is typically asked to make a written
statement as a part of the engagement letter that it is aware of no undisclosed contingent
liabilities.

Statement II - In a standard inquiry of client’s attorney letter, the attorney is required to

communicate about contingencies up to the balance sheet date.

Statement III - Because a client representation letter is a written statement from a non-
independent source, it cannot be regarded as reliable evidence.
a. Statements I, II and III
b. Statements II and III only
c. Statements I and II only
d. Statement III only

Use the following to answer questions 27-31:

Tyra Bank granted a loan to a borrower on January 1, 2016. The interest rate on the loan is 12%
payable annually starting December 31, 2016. The loan matures in five years on December 31,
2021. The data related to the loan are:

Principal amount P2,000,000

Direct origination cost 62,744
Origination fee received from borrower 200,000

The borrower paid the interest due on December 31, 2016. However, during 2017 the borrower
began to experience financial difficulties, requiring Tyra Bank to reassess the collectibility of the
loan. As of December 31, 2017, Tyra Bank expects that only P1,200,000 of the principal will be
recovered. The P1,200,000 principal amount is expected to be collected in two equal installments

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on December 31, 2019 and December 31, 2021. The prevailing interest rates for similar type of
note as of December 31, 2016 and 2017 are 15% and 16%, respectively.

Based on the above and the result of your audit, determine the following:

27. The interest income to be recognized in 2016 is

a. P260,784 c. P298,039
b. P279,412 d. P240,000

28. The carrying amount of the loan as of December 31, 2016 is

a. P1,902,516 c. P1,883,528
b. P1,920,783 d. P2,000,000

29. The loan impairment loss to be recognized in 2017 is

a. P1,140,380 c. P1,106,881
b. P1,090,262 d. P1,210,808

30. The interest income to be recognized in 2018 is

a. P114,374
b. P137,539
c. P103,154
d. P124,368

31. The carrying amount of the loan as of December 31, 2019 is

a. P478,307
b. P461,721
c. P556,704
d. P445,935

32. _____________ both have the effect of simultaneously verifying balance sheet and income statement
accounts.
a. Analytical procedures and substantive tests of transactions
b. Tests of details of balances and substantive tests of transactions
c. Tests of controls and substantive tests of transactions
d. Risk assessment procedures

33. Which of the following audit procedures would be least likely to lead the auditor to find and unrecorded
fixed asset disposal?
a. Examination of insurance policies
b. Review of property tax files
c. Review of repairs and maintenance expense
d. Scanning of invoices for fixed asset additions

34. Which of the following statements is correct regarding the auditor’s responsibility with respect to the
year-end inventory procedures of an audit client?
a. The auditor is responsible for taking and compiling the inventory.
b. The auditor is responsible for observing the physical counting of inventory.
c. Both A and B
d. Neither A nor B

35. During the audit of Paris Company for the year ended December 31, 2016, you noted the following:

Raw material purchases P860,000

Work in progress inventory decrease 10,000
Raw materials inventory decrease 30,000
Finished goods inventory increase 70,000
Freight out 90,000
Indirect materials and labor 600,000
Commissions paid 30,000
Direct labor 400,000

Hopeless Company’s cost of sales for the year 2016 is:

a. P1,830,000
b. P1,860,000

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c. P1,770,000
d. P1,910,000

36. Most companies use an imprest account to pay the payroll. Which of the following is not an advantage
of such an account?
a. It facilitates cash management
b. It limits the company’s exposure to payroll fraud
c. It allows the delegation payroll check-signing duties.
d. It eliminates the requirement of keeping a minimum balance in a checking account.

37. The statement that best expresses the auditor’s responsibility with respect to events occurring
between the balance sheet date and the end of the audit examination is that
a. The auditor is fully responsible for events occurring in the subsequent period and should
extend all detailed procedures through the last day of fieldwork.
b. The auditor is responsible for determining that a proper cutoff has been made and performing
a general review of events occurring in the subsequent period.
c. The auditor’s responsibility is to determine that a proper cutoff has been made and that
transactions recorded on or before the balance date actually occurred.
d. The auditor has no responsibility for events occurring in the subsequent period unless these
events affect transactions recorded on or before the balance sheet date.

Use the following to answer questions 38-41:

The Miranda Company acquired several small companies at the end of 2015 and, based on the
acquisitions, reported the following intangibles in its December 31, 2015 balance sheet:

Patent 200,000
Copyright 400,000
Tradename 350,000
Computer software 100,000
Goodwill 900,000

The accountant determines the patent has an expected life of 10 years and no expected residual
value, and that it will generate approximately equal benefits each year. The company expects to
use the copyright and trade name for the foreseeable future. The accountant knows that the
computer software is used in the company's 120 sales offices. The company has replaced the
software in 60 offices in 2016, and expects to replace it in 40 more offices in 2017 and the
remainder in 2018.

On December 31, 2016, there are no indications of impairment of patent and computer software.
The following information relate to the other intangible assets:
 Because of the piracy, the copyright is expected to generate cash flows of P8,000 per year.
 The trade name is expected to generate cash flows of P15,000 per year.
 The goodwill is associated with Miranda’s reporting unit. The cash flows expected to be
generated by the reporting unit is P200,000 per year for the next 25 years. The reporting unit
has a carrying amount of P2,100,000.

Based on the above and the result of your audit, determine the following: (Assume that the appropriate
discount rate for all items is 5%).

38. Total amortization of intangible assets in 2016

a. P70,000
b. P107,500
c. P88,750
d. P20,000

39. Total loss on impairment in 2016

a. P452,470
b. P530,280
c. P471,220
d. P433,720

40. Carrying amount of goodwill on December 31, 2016

a. P900,000
b. P718,780
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c. P855,000
d. P659,720

41. Carrying amount of other intangible assets on December 31, 2016

a. P690,000
b. P640,000
c. P980,000
d. P706,667

42. Which of the following forms of evidence is most reliable?

a. General ledger account balances
b. Internal memo explaining the issuance of a credit memo
c. Confirmation of A/R balance received from a customer
d. Copy of month-end adjusting entries

43. The expectation of misstatement after considering the effect of internal control is most appropriately
thought of as:
a. Control risk and acceptable audit risk
b. The combination of inherent risk and control risk
c. Inherent risk
d. Detection risk

44. ___________________ are future obligations to an outside party for an unknown amount resulting
from activities that have already taken place. Whereas, ______________ are agreements to commit
the company to a set of fixed conditions in the future regardless of what happens to profits or the
economy as a whole.
a. Contingencies, commitment
b. Commitment, provisions
c. Contingencies, provisions
d. Commitment, contingencies

Use the following to answer questions 45-49:

ABC Investment Property Ltd (“ABC”) constructs and / or purchases various types of properties. ABC
constructs a 3-storey building of which it currently rents out 1 floor. The floors could be sold separately,
but only if the legal status of the property is changed. Such a change would require carrying out some
formal procedures prescribed by the municipality.

ABC acquires an entertainment center encompassing a hotel (including a souvenir shop and some
bars and restaurants), a casino, various shops and some more restaurants outside the hotel area. The
hotel (including its bars and restaurants) is managed by a third party; only the souvenir shop is
managed by ABC. The casino is also managed by ABC. Responsibility for running the other shops and
restaurants in the entertainment center has been transferred to several other third parties under
management contracts.

ABC bought several properties in Holland, which it rents out. However, one of the buildings is located
in a poor and neglected area of a small town and finding tenants is difficult. The building has been
vacant for over a year now.

ABC bought three properties in Pakistan that it intends to rent out in the future. At the date of
acquisition there was no active market in the relevant locations. According to management it is
therefore not possible to measure the fair value of the properties reliably.

45. How should the three-storey building be accounted for?

a. Property and equipment
b. Investment property
c. 1 floor as investment property and 2 floors as property and equipment
d. 1 floor as investment and 2 floors as property and equipment

46. How should the entertainment center be classified?

a. Investment property
b. Owner occupied
c. Inventory
d. Partly investment property and partly owner occupied

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47. As one of the buildings in Holland has been vacant for over a year already, how should management
account for this property?
a. Investment property
b. Property and equipment
c. Noncurrent asset held for sale
d. Abandoned property

48. Management would like to measure its investment property in Holland at fair value and all other
investment property at cost. Is this acceptable?
a. Yes
b. No
c. Yes only if adequately disclosed in the notes to financial statements
d. No because investment property should be measured at fair value according to PAS 40

49. If management decides to use the fair value model to value its investment property, but it would still
like to measure the investment properties in Pakistan at cost, is that acceptable?
a. Yes because PAS 40 allows the use of fair value model on a property for property basis
b. No
c. Yes only if it is really impossible to determine the fair value reliably
d. Yes for as long as this policy is consistently applied

50. Which of the following cash transfers results in a misstatement of cash at December 31, 2014?

Bank Transfer Schedule

Recorded transfer Disbursement paid Recorded transfer Date received
in books by bank in books by bank
a. December 31, 2014 January 4, 2015 December 31, 2014 December 31, 2014
b. January 4, 2015 January 11, 2015 January 4, 2015 January 4, 2015
c. January 4, 2015 January 5, 2015 December 31, 2014 January 4, 2015
d. December 31, 2014 January 5, 2015 December 31, 2014 January 4, 2015

51. Generally accepted accounting principles require that material sales returns and allowances
a. Be recorded in the period when the merchandise is returned
b. Be recorded in the period when the credit memo is issued
c. Be matched with related sales
d. Be recorded as a debit to the sales account

52. Tests of details of balances are directed to

a. Balance sheet accounts for all cycles
b. Income statement accounts for all cycles
c. Balance sheet accounts for some cycles and income statement accounts for other cycles
d. All general ledger accounts for all cycles

53. An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic
financial statements. The auditor will have access to all information underlying the basic financial
statements. Under these circumstances, the auditor
a. May accept the engagement because such engagements merely involve limited reporting
objectives.
b. May accept the engagement but should disclaim an opinion because of an inability to apply
the procedures considered necessary.
c. Should refuse the engagement because there is a client-imposed scope limitation.
d. Should refuse the engagement because of a departure from generally accepted auditing
standards.

54. The process of “final evidence accumulation” is always done late in the engagement. Which one of the
following would be done the earliest in the engagement?
a. Final analytical procedures
b. Search for contingent liabilities
c. Evaluate the going concern assumption
d. Acquire the client’s letter of representation.

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55. Management furnishes the independent auditor with information concerning litigation, claims, and
assessments. Which of the following is the auditor’s primary means of initiating action to corroborate
such information?
a. Request that client lawyers undertake a reconsideration of matters of litigation, claims, and
assessments with which they were consulted during the period under examination.
b. Request that client management send a letter of audit inquiry to those lawyers with whom
management consulted concerning litigation, claims, and assessments.
c. Request that client lawyers provide a legal opinion concerning the policies and procedures
adopted by management to identify, evaluate, and account for litigation, claims and
assessments.

d. Request that client management engage outside attorneys to suggest wording for the text of
a footnote explaining the nature and probable outcome of existing litigation, claims, and
assessments.

Use the following to answer questions 56-60:

Apollo Corporation had the following equity account balances at December 31, 2015:
Preference share capital P1,800,000
Share premium – preference 90,000
Ordinary share capital 5,150,000
Share premium – ordinary 3,500,000
Retained earnings 4,000,000
Net unrealized loss on available for sale securities 245,000
Treasury shares – ordinary 270,000

Apollo’s preference and ordinary shares are traded on the over-the-counter market. At December
31, 2015, Apollo had 100,000 authorized shares of P100 par, 10% cumulative preference shares
and 3,000,000, no par, authorized ordinary shares with a stated value of P5 per share.

Transactions during 2016 and other information relating to the equity accounts were as follows:
 On January 10, 2016, Apollo formally retired all the 30,000 treasury shares and had them
revert to unissued basis. The treasury shares had been acquired on January 20, 2015.
The shares were originally issued at P10 per share.
 Apollo owned 10,000 ordinary shares of Boy, Inc. purchased in 2015 for P750,000. The
Boy shares were included in Apollo’s trading securities portfolio. On February 15, 2016,
Apollo declared a dividend in kind of one share of Boy for every hundred ordinary shares
of Apollo held by shareholders of record on February 28, 2016. The dividend in kind was
distributed on March 12, 2016.
 On April 1, 2016, 1,000,000 share rights were issued to the ordinary shareholders
permitting the purchase of one new ordinary share in exchange for four rights and P11
cash. On April 25, 2016, 840,000 share rights were exercised when the market price of
Apollo’s ordinary share was P13 per share. Apollo issued new shares to settle the
transactions. The remaining 160,000 rights were not exercised and thus expired.
 On January 1, 2013, Apollo granted share options to employees for the purchase of
100,000 ordinary shares of the company at P8 per share which was also the market price.
The options are exercisable within a three-year period beginning January 1, 2015. On July
1, 2016, employees exercised 80,000 options for P8 per share. On July 1, 2016, the
market price of Apollo’s ordinary share was P8 per share. Apollo used new shares to settle
the transaction.
 On December 12, 2016, Apollo declared the yearly cash dividend on preference shares,
payable on January 14, 2017, to shareholders of record on December 31, 2016.
 After year-end adjustment, the net unrealized loss on available for sale securities account
had a debit balance of P135,000 at December 31, 2016.
 On January 15, 2017, before the accounting records were closed for 2016, Apollo became
aware that the rent income for the year ended December 31, 2015 was overstated by
P500,000. The after tax-effect on the 2010 profit was P275,000. The appropriate
correcting entry was recorded the same day.
 After correcting the rent income, profit for 2016 was P2,600,000.
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Based on the above and the result of your audit, determine the following:
56. Ordinary share capital
a. P6,330,000 c. P7,950,000
b. P6,450,000 d. P8,250,000

57. Share premium – ordinary

a. P5,000,000 c. P3,380,000
b. P4,880,000 d. P4,970,000

58. Total contributed capital

a. P13,220,000 c. P18,615,000
b. P8,250,000 d. P16,725,000

59. Retained earnings

a. P5,275,000 c. P5,170,000
b. P5,445,000 d. P5,395,000

60. Total equity

a. P18,615,000 c. P18,480,000
b. P18,255,000 d. P18,530,000

Use the following to answer questions 61-65:

Your audit of the Jolly Corp. disclosed that the company owned the following securities on
December 31, 2014:

Trading securities
Security Shares Cost Market
Sycamore, Inc. 4,800 P 72,000 P 92,000
Elmwood, Inc. 8,000 216,000 144,000
10%, P100,000 face value,
Vanguard bonds (interest payable
seminannually on Jan 1 and Jul 1) 79,200 81,720
Total P 367,200 P 317,720
Available-for-sale securities:

Security Shares Cost Market

Score Products 16,000 P 688,000 P 720,000
Tower Lakes, Inc. 120,000 3,120,000 2,920,000
Cornell, Inc. 40,000 480,000 640,000
Total P 4,288,000 P4,280,000
Held to maturity:
Cost Book value
12%, 1,000,000 face value, Discoverer bonds P 950,000 P 963,0000

During 2015, the following transactions occurred:

January 1 Received interest on the Vanguard bonds
March 1 Sold 4,000 shares of Elmwood Inc. stock for P 76,000.
May 15 Sold 1,600 shares of Cornell, Inc. for P15 per share.
July 1 Received interest on the Vanguard bonds
Dec 31 Received interest on the Discoverer bonds.
Dec 31 Transferred the Discoverer bonds to the available-for-sale portfolio. The bonds
were selling at 101 on this date. The bonds were purchased on January 2, 2014.

The market values of the stocks and bonds on December 31, 2015, are as follows:
Sycamore, Inc. P 22 per share
Elmwood, Inc. P 15 per share
10% Vanguard bonds P 75,600
Score Products P 42 per share
Tower Lakes, Inc. P 28 per share
Cornell, Inc. P 18 per share
Based on the above and the result of your audit, determine the following:
61. Gain or loss on sale of P 4,000 Elmwood, Inc. shares on March 1, 2015

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a. P4,000 loss c. P32,000 loss
b. P4,000 gain d. P32,000 gain

62. Realized gain or loss on sale of 1,600 Cornell, Inc. shares on May 15, 2015
a. P4,800 loss c. P1,600 loss
b. P4,800 gain d. P1,600 gain

63. Total interest income for the year 2015

a. P130,000 c. P144,820
b. P125,560 d. P143,000

64. The amount that should be reported as unrealized gain resulting from the transfer of Discoverer bonds
to AFS
a. P47,000 c. P61,820
b. P32,180 d. P0

65. Carrying value of Trading securities (TS) and Available for sale securities (AFS) as of December 31,
2015 should be:
a. TS – P241,200; AFS – P5,733,200 c. TS – P241,200; AFS – P5,762,000
b. TS – P301,200; AFS – P4,723,200 d. TS – P301,200; AFS – P5,720,800

Use the following to answer questions 66-69:

Hombre Company had the following bank reconciliation on June 30, 2015:
Balance per bank statement, June 30, 2015 P3,000,000
Add: deposit in transit 400,000
Total 3,400,000
Less: outstanding checks 900,000
Balance per book, June 30 P2,500,000

The bank statement for the month of July 2015 showed the following:
 Disbursements (including P140,000 NSF check and P10,000 service charge) – P7,000,000.
 Deposits (including P200,000 note collected for Hombre) – P9,000,000

All reconciling items on June 30, 2015 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, 2015.

Based on the above information and the result of your audit, determine the following:
66. July 2015 cash disbursements per book
a. P5,950,000 c. P6,550,000
b. P6,700,000 d. P7,450,000

67. July 2015 cash receipts per book

a. P9,400,000 c. P9,600,000
b. P9,800,000 d. P8,400,000

68. Cash balance per books on July 31, 2015

a. P5,350,000 c. P5,400,000
b. P4,850,000 d. P4,950,000

69. Adjusted cash balance on July 31, 2015?

a. P5,000,000 c. P5,400,000
b. P4,900,000 d. P5,350,000

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70. Which of the following statements is false?
a. Analytical procedures emphasize the overall reasonableness of transactions and the general
ledger balances.
b. Tests of controls are concerned with evaluating whether controls are sufficiently effective to
justify reducing control risk and thereby reducing analytical review procedures.
c. Substantive tests of transactions emphasize the verification of transactions recorded in the
journals and then posted in the general ledger.
d. Tests of details of balances emphasize the ending balances in the general ledger.

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