CPA REVIEW SCI-iTJOL OF THI PHILII FiNES

Manila
AUDITING PROBLEMS SFFTFMBER 15, 2013
FINAL PREBOARD EXAMINATION SUNDAY, B:00Al."1 - 11:00AM

SET A
INSTRUCTIONS: CHOOSE THE BEST ANSWER FCR EACI-I OF TI.IE , FOLI-C\^IING. FULLY
SHADE ONLY ONE BOX FOR EACH ITEM. STRiCTLY NO ERASURES ALLOWED.

PROBLEM NO.1

The TGR Company commencecl operations on Janu,ary 1, 2009. -Ihe company's machinery
account is shown below.

Dare pa:leulals Deort !J'-,:di-! Balance

Jan. 1,2009 Purchase ilt57 2n0
I r0 t)ri l
a1 'r.'1
t -'l- rl .:1. ?409,200
Sept. 30, 2009 Purchase on installment
Payments from Sept. to Dec, ..'2,C,_)i.i 48L,200
Oct 3, 2009 Freight and installation 6, i,0il 497,2A0
Dec. 31, 2009 Depreciation P'3t,4'li: 389,760
2010 Installment paymerrts foi- acgils;'ri:i,
on Sept. 30, 2009 \,1,,a\ !::,\) 533,760
June 30, 2010 Purchase .f iil,Jt-l'i 773,760
Dec. 31, 2010 Depreciation i.5-l ,::j":' 619,008
.rune 30, 2011 Acquisition - trade in of oid t'aCiiii-:; i tt: i,i){j 769,008
Dec. 31, 2011 Depreciation i5-,iiii1 615,206
lan. 1, 2012 Sale 7",).!,1) 543,956
Dec. 31, 2012 Depreciailon icii,7il L 435,165
Oct. 1, 2013 Sale z4,i.lt)0 41i,165
Dec. 31, 2013 Depreciation 8..,')_':,1' 328,932

The details of the ti-ansactions are as follours:

a) On September 30,2009, a machine was i-1r.rir:lt:tsrtd,.\:r iil ,.1;lttir,rn' r'.,3:;ii, -l-he Iist prrce
was P180,0C0. but 12 pay.nents gf P1c1,rlf,)0 tlcir \,1/er"i .r,.tce hv I te r:itr.;any. Only the
monthly payments were recoi'ded ir'the m,icl:iner\: aLa(runt sirrii;'g ^.'ith:it:piember 30,
2009' Freigirt and instailation clrai-tc:; ol'i)i:.IC'.1 1^/ere lar(-r a,]r-i il,a;.1_lefl lc ihe machinery
account on October"3, 2009,

b) On June 30, 2010, a machine was purclrasi:"*1 ici. i,).'+:.';,r':') t, .':.,,1,J, ,-;,'j:, arrtj recorded at
P240,000 when paid for on July 5, 20i0.

c) Cn June 30,ZALL, ihe machine acquired far Pi57,ZAL.r lrras ira,ir{J i'cr a j.:ioer one having a
list price of P279,000. Ailowance of p129,00C r^,as recei;-ei on the tld rrai.tiine. r:l-re balance
of thc'lisi price being paid ln cash and,:hai-gc;r io ilre rra,.l'!lei;/ ijJ(.rLrr:1.

d) On January 1, 2AL7, the machine acquireci on January i, 20U,1 rvirh cr:si o{' p132,000 was
sold fbr P75,000. The cost of removal ancl crating ictaierj t,3,75c.

e) On October 1,7A73, the machine purchaserj nrr ianriiri 1, 21,'{-19 !,,,1i1, s:.)ic i'or p24,000 cash.

Assume a S-year useful life for TGR Company,s nrachrnerT.

D 1, lVhat is the total amount of gain ,::t the Sul;+',,ii ;:i.if -i:.r Oi tr-e l1lc(,it,:-r?y aCqUifed On
January 1, 2009?
A. P50,400 B. FtlA,zAC (:. F'16,.15r.1 D. r)86,850
Gain on trade-in Gain on sale Gain on sale & trade-in
Peae 1 ct .l P).);?
C 2. What is the adjusted balance of the Machinery account on December 31, 20L3?
A. P694,200 B. P705,000 C. P700,200 D, P703,950

C 3. What is the adjusted balance of the Accumulaied depreciation account on December 31,
7013?
A. P465,600 B. P457,L40 C. P462,74A D. P397,740

B 4. What is the correct total depreciaticn provisior, it;* the years 2009-20732
A. P737,40A B. P734,04A L. P728,9/r0 D' P669,540

A 5. The entry to correct the depreciaticn prr:vision for the years 2009-2013 should inciude a
debit (credit) to
Depreciation Expense Bclained_Earntngs
A, P75,807 P6L,215
B. (P18,492) ?79,747
c. P18,492 (P79,707)
D --:]-tr-t:1-------,ocoooooool-]-?'-1::-----

PROBLEM NO.2

You have been engaged to audit the financial stater"nents of HABAGAT, INC. for the fiscal year
ended June 30, 20t3. The cost of gor,ds soicj sectjcn of the income statement prepared by
your client for the year ended June 30, 201-? anpetars as follows:

Inventory, July 1,201,2 P 75,0C0

Purchases 540.000
Goods available for sale 615,000
inventory, June 30, 2013 IO-L.QAQ
Cost of goods sold P51!*@
Although the books have been closed, your' \!r,ik,irE paper trial balance is prepared showing all
accounts with activity during the year. r-hr, -lr;lv' 1 and -lune 30 inventories appearing above
were deterr'nined through physical ccrnt anrl no reconciling items were considered, All
purchases are FOB shipping point. The company uses the periodic inventory system,

In the course of your examination of the lnvenii:ry r.utoff, both at the beglnning and end of the
year, you discovered the following facts:
illlt,"I-.J0,X2
a) June inrroices total:ng I,19.500 were enlered in the voucher register in June, but the goods
were rict received until -lr.ril,

b) Invoices totaling P8,100 were enter-ed in the voucher register in July, but the goods were
received during June.
luns-S,e 20il:l
a) Invoices totaling P27,900 were entered ;i-i llre ,;oucher register in July, and the goods were
received in July, but the invoices wer:: daieu iune,

b) June invoices totaling P11,100 were er,terea'in the voucher register in June but the goods
were not received until July.

c) Invoices totaling P16,200 (the corresponding qoods forwhich were received in June) were
entered in the voucher register, July.

d) Sales of P26,4OOwere made on account on Jr-rne 30 and the goods were delivered at that
time, but all entries relating to the sales were made in July.

B 6. What is the adjusted inventory on lL,lv L,2012?

A. P86,400 B, p94,500 c. p63,600 D. p102,600
Page 2 of '14 Pages
 AUpmNG pRoBLEMs ;r -'-"'-""'' i.lIffiilfff,ilffiil
D 7. what is the correct arlount of ourchases fo;- rhe year eniJerl ,iuine 30, 201-::?
,A. P584,100 , B. P592.2C0 i. i,sl;s-Brjc D. i,576,000

A 8. What is the correct inventory on June 30, 2013?1

A.P744,000 g. P132,900
i; c. Pti6.1C0 D. P135;900

A L t

The accounts payable balance on Jrrne 30, 2013,;shoulci lie increased

bv
A. P44.10tj B. PZ7,}AA
l (.. P:i7,i0c D, P55,200

C 10. The correct cost of goo<is sold far the year *n,lula june 30, 2013 is
A. P537,600 I p553,800 C, p526,50i) D. P507,300

PROBLEM I\iO.3
I

In connection with your audit of tlre financial stai,:i-nents of TAi\DEi'4 CO, for
the year ended
December 31, 2013, you obtained the foilowing inforrrration
,:n rfre che:king acccunt of the
company. r

'The
bank statenrent on Nover-ni:er 30, 2{11.3 si:ov.rec a Dsiar,c_:
of F3C5,itc:). Among the bank
credits in November was a ct-rstonrer's rirjtrJ {oi- P10c,t}r,!:
i,--riiectrcl fcr l,ie accolint of Tandern
Co' lvliich was recognized in Decentbei ,i irr-'ir{,r jt:;:'e:-.cipis.
Iniirrcleti ri-r the bank crebits were
cost of checkbooks amounting to p1,2,10 anc a p40,00.i
r_heck wri;cn was charqed L:y.ihe bank
in error against Tandem Co. accouni. y'rlso in No,rernber, you
ascert;;r:e;l ti,;i lhere were
depositsintr"ansitamountingtoFBr-1,i.l0-Ce,-r.ial,tsi.a;.o;,.,j.nn.ii.5ilr'3i,.]?ii,,a,6i;n,

The bank statenient on December 31, 201-J r.[tat .re,-rit,- r-i i)zi]6,a){-)c ar:cj total chargls
siroinrea-tr.,.
of P204,000. 'ofirD,rr,y .),1r1(c rb,' Ds-,-e.,vlp ,f i,,.; tutil et -, pr urf p735,600 and
disbursemens of P4a"/,ZOat 'l-he cash ;n hanl.;
n;,i;rc; il r l),-c,-,r-rrr i 3 : is t,/iB5,acp. Bank
debit memos for December r,yore: r,,Jo, 1i2 ir:r t".ri.n
customer's returned check fc:. F2.1,00c. "":r'" . i:,i:{,-t,
- :'-'- c*.ir..rr.r :"r\r ''' and
' * r,,lo, 113 on a
Tl're bank error of P40,000 ii Novembei !va5 correiiec I)l irli, l:n; ri< :n )ri--i--r,;r1,r.
On December 29, 10^11 Tal,cetn Co. piaceJ ,otirir
i::-t baiii.. a Lii.,,::i-,,e,, :; [, _,.-rti:,liorv 6ote with a
face value of P120,000 fori collection. The colnr_.,:_,r.\. t-,i, *.1r,:
fi ri.) r:,_rre _is .,art: oi its receipts
aithough the bank was abrelt" i,r".tfr, r;;;;,-,..,,,1r,,''..
i-:,,. -. 2,,.,i.

A check for P3,960 was recorcled iri the c{)nrrpirn,.r,

reqh o:j /i,-:r-jilr:j ,).rgi{ iir [.:,r.-.-..ber a; p_]9,500.
A 11. Whal is the total outstand:nE iiecks on tl;uie,^itL.,er
-i1., .i,r:_i,l
A, P361,960 B, i43*t,:.+i a. ir:i.t7.i)50 t) r136,360
C 72. What is the total deposits !n transit cir
[..,] . ,! . i[, .".,1"r
A, P.339,600 U. p17g,C00 a . i,,:, ,,.. ,,, ,.,
l.: , pl 19, 600

A 13. What are the adjusted bank batani.c:;,i ;,r._ ,.r-,,1:1r1; l,r; ;,;-,.;. 1-.,ir ;:ii iei'i1?
I'i,r-y_erbct-3-Q lJ"L,i, r,-., l_

P256,000 f .)/ .t +,1

B. P259,400 P3,1ii " 6:4tl
C. P256,000 P3 i fi,,3.!r_'
[\
Pi76,000 i,.4)3,j4'

C 14. What is the adjurstecl Decenrbe;- boc,r

rertit:,l;-
l-l i.:r
A. P516,000 t3. P715,60il .:. ?:, i-r, ir595,600
A 15. What is the adjusted Decemi-.e,- bank riisf,,.rsemerimJ
A. p395,960 B. p735,gt-0 c. n4b7
,t,.l,.i D. 1396.760
 PROBLEM NO. 4

MINA MINING CO. has acquired a track of minei'al land for P50,000,000. Mina Mining estimates
that the acquired property will yield 150,000 tons of ore with sufficient mineral content to make
mining and processing profitable. It further estimates that 7,500 tons of ore will be mined the
first and last year and 1"5,000 tons ever/ year in between, (Assurne 1L years of mining
operations,) The land will have a residual value of P1,550,000.

Mina Mining builds necessary structures and sheds on the site ai a total cost of P12,000,000'
The company estimates that these struc'ures can be used for 15 years but, because they must
be dismantled if they are to be movecl, they have nc residual value. Mina Mining does not
intend to use the buildings elsewhere.

Mining machinery installed at the mine was purchased secondhand at a total cost of
P3,600,000. The machinery cost the former ou;ner p9,000,000 and was 50o/o depreciated when
purchased. Mina Mining estimates that irirout half ol" this machineny' v^rill still be useful when the
present mineral resources have been exh;tuste;l b'rl tn,;L dismantiing and removal costs will just
ahout offset its value at that time. 1-hc ccmpany ooes not intend to use the machinery
elsewhere. The remaining machinery rvi I iasi i;ni:ii abouL one-half the present estimated
mineral ore has been removed and yvill tl:r:n be rrvorthless. Cost is to be allocated equally
between these two classes of machinery,

C 16. What are the estimated depletion and depreciation charges for the 1't year?
Depletion Depreciation
A. P4,845,000 P870,000
B" P4,845,000 P780,000
C. P2,422,504 P870,000
n
e" P2,422,544 P780,000

D 17. What are the estimated depletion arid depreciation charges for the 5th yearr
Depletion .D-egeelalra!
A. P2,422,540 P1,740,000
B, P2,422,500 P1,560,000
C. P4,845,000 P1,560,000
D, P4,845,000 P1,740,000

C 18. What are the estimated depletion and deprer-iaticn charges for the 6th year?
Depletion Depreciation
A. P2,422,500 P1,560,000
B. P2,422,500 P1,740,000
C, P4,845,000 []1,560,000
D. P4,845,000 P1,740,000

C 19, What are the estimated depletion and Ceprecietion charges for the 7'n year?
Depletion Depreciation
A. P2,422,50A P1,380,000
B. P2,472,500 P1,560,000
C, P4,845,000 P1,380,000
U, P4,845,000 P1,560,000

D 20. What are the estimated depletior, and depreciation charges for the 1lth year?
Depletion Depreciation
A. P4,845,000 P1,380,000
B. P4,845,000 P690,000
C, P2,427,500 P1,380,000
D. P2,472,540 P690,000
ooo000ooo--------
PROBLEM NO.5

SANTOL CORP. invested its excess cash ia r,on-t.ading'equity securities during 2013. On initial
recognition, the entity rnade an irrevocabie erecr':ion to present its securities at fair value
Paqe 4 of '14 Paqes
7 ;'*;iiri'".i;;i*n . I
- -* - -- '-

tlrrough other comprehensive incor"ne'

portfolio consisted of the following;
I

Investee Cdmpany
Kelly, Inc.
_--_
A.s

Shares
30,000
sEpTEMBER 1s, 2013

Cost
P 450,000
/ suNpAy / 8:00AM

of December 3L, 2O!3, the company's

Fair Value
P 425,000
- 11:00AM

securities

Eloy Corp. 60,000 1,500,000 1,610,00c

Yogi Enterprises 60,000 2.160.000 2.300,000
Totais P4-UA.&La P4.335.000

purchased
r.fl, santor sord 60,c:0?jli:.^'?1.:]:y:.!,?:1^lrj:^,:1t:3t0 and
60,006 additional sh{res of Kelly, Inc. and 30,0Ct0 shai-es of Kongga Company'

On December 31, 2014, Santol's porffoiic cif tton-irading equiby securities comprised the
following:
Cost Fair Value
Investee ComPanY Shares
Kelly, Inc. 30,000 P 450,00t) P 500,000
60,000 1,3oo,ooo 1,450,000
Kelly, Inc.
30,000 520,000 480,000
Kongga Company I

Yogi Enterprises 6L),000 2,160,00Q 700p80

P4 43_0-L00 P3.130.000
Totals

During the year 2015, Santol sold ali the Keliy, ir;r:. si:ares for P2,3rJ0,000
and 15,000 shares of
santol's porrfolio oi iron-
Kongga Company at a loss of P90,00c on L,ecelrnber 31,2015,
trading equity securities consisted of the r>lii;winq:

Investee ComPanY ;t1:tles Cost tau-Valrc

sc,000 P2, i60,000 P4,200,000
Yogi Enterprises
15,000 _loQ.-0!!- ___ 130,000
Kongga Company
Totals PL,i;ii,00g P4.380.000

D ?t. What are tl-re balances of the iollc,ving a:ccuints as of December 31, 7013?
Non-tradirtg Ui"ire.llized
Equily Gairi on Ncn-trading
SecuritieS F-cruLly-$-sc-u-nllcs
A. P4,335,000 PO
B. 4,110,000 0
C. 4,085,000 0
D. 4,335,000 22-5,000

A 27. What are the balances of the following accrtlnts as of December 31, 20L4-)
Non-trading lJi.i'eaiized
Equifry Gaii'r on Non-trading
Securitiqs Eqirlg_SeeU![ies
A,
^l P3,130,000 F,0
B. i

I 3,13o,ooo 1,300,0c0
4,430,000 0
D. 2,450,000 1,980,000

A 23. What are the balances of the following accounts as of Decenrber 31, 2015?
Non-trading tlnreal,zed
Equity Gaiin c,r i'jon-trading
Securities EqurU-Seeunltes
A. P4,380,000 F.l-,951J,000
B. 7,470,400 0
C. 4,380,000 0
D. 2,340,000 2,090,0c0

A 74. What is the realized gain or loss on the saie ot Eloy Corp' shares in 2014?
A. P10,000 loss B. P120,000 losr C. Pi00,000 gain D. P90,000 gain
D 25. What is the net realized gain r:n the saie cf secirriries in 2015?
a. n1\[ I n,1/1 L'.
A. P550,000 B. P460,00{) r-I )IJ,UJU Pl-60,000

l
I
I

PROBLEM NO.6 i
tl i

DONNA MANLIFACTURING COMPA|{Y \^/as incorporate:1 or janri;;i';'

), ".i{:iZ. r Ie r-ompany s
financial staterlents for its first year of cperalir-rns'/ie,r. irot;r;"ldrre( [,r u Ci]r\ Yl,-r rrave b9en
engaged to auciit Donria': financrai l,;iai-e'ne',1: ict 'int: yuai- r:i]c: i ).lCf ,]
r:r:r 3i,2013.
Presented beiow is Donna's trial L,llance (part,ai) on Dlccen'her 31, 20i ,.

Qqbii ers-ql:
Cash p 330,c00
', l-i: . rnrl
Accounts receivable Lr*, JrVU\,

Allowance for bad debts P 15,LrCr0

Inventories i., :.55,Ci;,:
Machinery ?, Z5i),;-1r.'!)
Equipment ij'j i.: ::;i.t
2 -,'. ,lr-.'r
Accu m ulated depreciation
Patents (information 1)
Leasehold improvements llnforrnaiicn 5)
Prepayments
Crganization costs (lnformation 5)
Goodwill (Information 4)
Licensing Agreerneirt i (infirrmation 2 anrl 3)
Licensing Agreement 2 (informaticn 2)

Additional information :

1. Patents ior Donna's man'lfa -turinE fro(ess .',f r ;: ; -i,r'!',r

-i':li- 1i' ., ,l'.it ' at a cost
P2,040,000. Donna spent an additional P-c1,j,JLii.in Dr:cci'1b,.'r l-,-)1i :o ii:rr.\io\/e ntachinery
covered by the patents arrn inclr-ided rn llre Pateni- Ji.,i-,r,r",i i.)ar-rrrft..
-i-,e
Uaterrts had a
remaining ieqal life of 17 ,7ea,i-s

2. Donna purchased two licensing aqreeinents on -l{lriuili-r,,,<, r:i:i,r '. ir.-, ,.,,-- 3 lelierred at that
time to have unlimited useful lir.res, The baia;r:ce of l"i.r.r- -':i 'l Ji r,,, .l i,v;:i rerluced by
P30,000 for the advance collecticn qlf ;grTsndf) fr-or,: :i,i '.r,1:.:,r ri-r-i

3. In December 2A12, an explosion causeC a fj0oz; t'r.rCLr:,io,- ,i, t-,e i.'xorcted revenue-
producing value of Licensing Agr-i:erne nt .i . I .rr.,l : ,: r'r ,'-' 'cl \ e ;,r 1.,,- Lrt tif [-icensing
Agreement l was determinei trL he P(r{10,00i1 ilt [''rr-:.,"l.;l,:i' ,:, --'-. ],

4. The balance in the Goocjwill account inclucle; P7)-Oj:A1113,i6i l-re6grri,er ?'1, 2C72 for an
advertising program which it is estir'natecl rrvill arssist i,t !i',r-rra:r;r'ig litrrna's sales over a
period of four years followinq the dtsbursernenf .

5. The Leasehold Improvement accounl lnci'ides the fc:lir,r'r,r',c'

a. P450,000 cost of improvements 'r.rith a tcrtal C-(iiri,ri".iri. ,-.' ,: I ' _,i'iI'l,e,lrs, which
Donna, as tenant, made to leaseC fre-rt:se -"i.r -,1;,:.;r.i., ''i ' ,., : t.
b. nrovable assembly-line eq ripment ic.;t,i ,.r ,i l -..' -)l , i ri,F ' ,a lr il3ir id in the leased
premises in Decembcr 2{i1J,

Donna paid its rent in fuil cliriing ;1013, A lrl- .r;:r- ,,:':','i :
i -.. ia .r \,.i.-j ;;l(1ler-1 JanUafy
3, 2017 for lhe leased building thal Donna iis,:r.i j'ir 1,. ;,i.; ii..

6. The balance in the Organization Cosis acccLinL inclur,J,,,l

the orqanizational period.

A 26. What is the carrying amount of the Patenis l.rt Decen,b,ri :1- : r r :l;
A. P1,920,000 B. ir'2,4'J0,000 L, P.l. i l:il,l"ti '. tr, i 2,040,000
 cPA REVIE\! SCHOOL OF THE pHILIpptNES (C9AR) - tlA\rLA FINAL PREBOAT?D EXAMINATION
I SUN[U]L'/ I s :-Q0A[1--1 ].QQM
B 27. -----5EflEryl-EEts-$-?g.13
What is the carrying aniount of Licensing agreement L on December 31, 2013?
A.P1,500,000 B. P600,000 c. P900,000 D. P2,100,000
D 28' What is the cdrrying amount of Licerrsinq agreenient 2 on December 31, 2013?
A.P2,100,000 B. P1,470,000 c. P60c,ilO0 D, P1,500,000
A 29. What is the carrying amcunt cf the L"easehokl tffipirl'r3r,1cnts cit De..errlber li, 2C13?
A. P360,000 ts. P780,000 C. P,:150, C00 D, P624,000

A 30. The net adjustment to Retainec! earnings to i'r.fleci: ail the necessa-rrv coi-rect.rr.;ns from
information 1 to 7 wili amount to
A. P2,535,000 debit
B. P2,580,000 debit
C. P2,535,000 credit
D' P2'sB0'0o0-::::1"
- ---r:orieoooo,,---.*--
PROBLEM NO. 7

You are examining the financial staternents of SALUYO-T COMPAXT'/ Fcr lhe
'7ear ended
December 3t,2A13. Your audit cf tire accounts receivanie ancl rlther relatecl accc-.unts cjisclosed
the foilowing information :

1. The December 31, 2013, balance ln the,Accounts [leceivanls corrtrci aci:,':r.]t-ti is P788,000,

2. The only enLrie:; in the L-laiJ Dei-ts ExJr:i;s: a:r")uitl t',3irt,

a. A credit for P1,296 on L)elr.--t!:er ,, ,.3.iJ. l-;e:c"tui.t: -r-,,t- "t -i r ll.,rit..tC ir, r'uil for tl-re
account charged off Octobcr" Ji, Zt)t:,.
b. A debiton December 31 fo: ihi. 3nr:r., 1 -r1t i-ri1; .-:.;.,

3. The Allowance for Bad Debts accoun'- rs prg5sn1._,,1 t,c;e v,,:

-r:q,l _ili;:,jt,,,.*
I
Particulars
i
Jan 1 Balance
Oct. 31 Uncollectible:
Customer A Pl 290
i) I . )rj
Dec. 31
I

4. An aging scheduie of the accounts receivabl.r r-ri, uf f):crjrrl),..i 'i r, lO.i; ,il ri the decisions
are as shown in the table belcw: i

,jr; t'J u r rt lt; wh i cl-: if : r) i i i r.iuv ;i r.i c{,:

Itlel Debit i, it le a.llusleil a,'le :"t,Jjr;t;'.mttrrt.:;
AG E pi.al_a:ce ,jr,; i,"'ii_. lji. l' r' 11,.1 I -:t,;i '', !i,:
0-1 mr:nth P37Z,16A 1'./.'
1-3 months 307,ZBA 2-:tt
3-6 months 88,720 3,)/o
Over 6months 24,AAC Dgfi:tite,), u,l(,-,i1,;: i,;;r.1, '-'' , 1-'j;
f E. lCij ig i,911;,,i1r i'i.' :.r,, ;',,,. rl'.. '
r.tnfriie:-r;i:ie ; l.ii,,, , r.;11;,.1it6 f i ;.,
e:.I-i;rri,i";',-i to bi '. :': ., ;' ',,,", 1jr
?792,S6a_

5' There is a credit balance in one a.c{:i.r"'}r, receivar-,iE (0-1 ;l:rrii:\ ,_li I .r'il; ii represents an
*i,,
advance on a sales contract; also there is a crc*ril f.r,:,irri',tc re ,if :htt .t-l months
accoLints receivable of P2,00c ;or rryhich ,-nerrharici:,.r vriii l;. i,. ,"' b,i -n:: cds[0iner.
 cpA REVIEW SCHOOL OF THE PHILIPPINES (CP,\qi - MAr(i:,A FINAL PREBOARD EXAMINATION
auprrlNc PROBTEMS _-----sr-]:TEpiarn is. zot: I s

6. The Accounts Receivable control account is not in agreement with the subsidiary ledger.
The differences cannot be located, and the company's accountant decides to adjust the
control to the sum of the subsidiaries after corrections are made'

B 31. The adjustment to correct the entry rnade on Deccrnber 1, 20L3, is

A. Bad debts expense 1,296
Accounts receivable 1,296
ts, Bad debts expense 1,296
debts
Allowance for bad L,296
C. Accounts receivable L,296
debts
Ailowance for bad I,296
D. No adjusting entry is necessary.
B 32. The required allowance balance (per:gi:lu) cn l-iecember 31,2013, is
A. P2g,354 B. P19,058 c. P19,858 D. P3?-,858

A 33. The net r"ealizable value nf Saluyot's accr:unLs re.ei','at-rle on Decemher 31, 2013 amounts
LU

A. P77g,gA2 B. P774,!'.;:. c. P793,200 D. P788,664

A 34. Saluyot should report bad debt expen$? ii-'i -{; ii of

A. P13,344 B. ?27,34/, C P10,296 D' P33,936

C 35. What entry is necessary to adjust i,,13 3ii;'-';-i-r,- icCouflt at December 31. 2013?
A, Bad debts expense 10,296
Allowance for bad debts 1'A,796
B. Bad debts expense 13,8{i0
Allowance for bad debts 13,800
C. Allowance for bad debts 1A,796
Bad debts expense 10,796
D. Allowance for bad debts 13,800
Bad-debts
:ll-:::----- oo'Gooooo-------- -----11:!-oo

PR.OBLEM NO.8

sAN FELipE TRADING CCR.PCTIV\TIOr'] was incorporateci 3 years ago as a trading company
engaged in the sale and distribution oi i'rardrruare and electrical supplies. Its offlce and store is
located in Batangas City.

You were given by your client's contrcller a cr,i,'/cf the unadjusted trial balance as of December
31,2013.

The company maintains its Lrank acccr-rnt ,,,vitl. Sr:cr;red Bank. Your re'riew of the bank
reconciliation statement disclosed the follr:wii-;i.r i.fi,rma ii.ln :
;

1. On December 22,2013, the bank erronecusl'i credlted the account of San Felipe Trading for
P195,000 representing deposit for the acc,':t-r'ri :rf another company.

?-. Postdated checks tctaiing P40,000'"t,-re ir,:llidcd in the deposits in transit. These represent
collections of accounts receivable from c,J:i1.crli'irs. The checks were actually deposited on
January 5,2014.

3. On December 28,2013, the company issueci <-hecks to creditors totaling P1i5,0il0 Tirese
checks were released on January 5, 2014.

4. A chreck clate,l Decernber 12,2013 in p;yment of accounts payable was recorded as

P:l2,000. Upon examinatlon of the checks return3d by tire banli, tlre actual amount was
P21,000.
 LPA RtVltW SLHUOL OF I HE PHiLiPPillES (CPA.R) FlANILA FINAL PREBCARD EXAMINATION
AUDITING PROBLEMS _ SEfltMsr:R t5.2!13.l5UlluAYf_8-Q0AM - i1:00AM
-
5. A check for F4,750 in payment of a n-rinr;r repair ol office eqir;pment was not recorded on
the compan'v books.

6. Transfer of fuhd of P59,300 to Secured Bank current account of DBS Securities was not
recorded. This pertains to p,:rchase of 5,000 s;hares of Wiiliarn Lines tr: be held .:s trading
securitles, Based,:n quoted prlce as of Decemb,3r:r, 2-013, the nrarket va!ue per share is
P1 5.

7. interest earned arnounting ic P5,77-0 was not recorCed.

B. Deposits in transit and outstanding checks at Decenrber-3i, 20i.3 amilnteC to P89,200 ancj
P132,000, respectively.

9. The cash in bank balance per book orr Decerlber 31, 23i3 is P68i,200.

The Petty cash fl;nri .:f P3-,,090 n-raiirtaineo crt dt ini::ell basis lras countert cn )arutary 2,
201"4. Unreplenished erpenses rr,cir,rcle petry, r-ash vr-:uchers i'or '.,arioL:s expenses totaling
P19,30C and entplo',,ees'ed'yances for P5,8Ci aii rlatec December 2013,

San Feiipe purchased sever;ri it't.trket(lbij :,ec,-.ri-i';r:s i1r-.iriirq -,:0i3. ,\t Decernper 3L,2013, the
compan,v had the investmeitts rn equii;r secur;li(:s iiste i b,,:lt',r . i.i.; re i,;:l: i";eid at the last
reporting dale, aild all secr-rrities are consicr:;-r I ; l:t I'i " 'r,:i;it,q, -i 1 ., co|- oair,y made an
'
ir;'evccabie election to present fa,r'.,alue chai-,g:]s in :,,, 'iar r-t -r't-'r :rt,e,r:., te r',rrr;i'1.:'..

Na.,oI_9lurg lYi,t,'i,c-;-,,;]-u
San Pliguel "A" 2,0c0 :ti-f,
Seniorify" Bank 1,., ^.,\;r',t.':\ :ia:
Multivit r,ci:u . ir".
l-ofal

Your physical count of stock certificates disr..io:;ec1 1,",;i :,...' ,,, :,,.11r;,p;j 1-1,'

wei-e not yet i-ecoided,

issue Np,gf-SiatrJ
Seniorit'i Bank 50c
i4ultir;it rlii
"l

The unadlusted trial balance of the compan'/ at ar ')rll-.

DecerrLre r

accounts:
'rlr:r
:i,-i ilrl
l\.ccounts receivable pr +l:,1i -";

Aliowance for doubifui accounts F i0,:,'00

Sales 1r,fr20,C1.)0

Your reriiew of the accounts receivable .<i:hedulo drscir::;::c l,' ,l ,u. I Oi : ,..',i,C:: .ti. l,'S tCtaling
P17,350 were not reccrded in the b:ck; bi.;i i-r:t-c:,rtt',, refti:1.:, . : r i.l,; :iU ... i,:ra;r' i*dgers, You
alsu noted the following inloi.i:raticii:

i. A customer's deposit of P38.C{;L) 'i'or qoods tr ;,e i-leii;,rr,,,J 2 -)l .i was deducted
frorn accounts receivahie.

2., A, cash advance to an officei- of P75,0C0 w i,.: rncluCerJ ori filrt of accc,ui ts i'eceivable.
3. Goods scid cn account and ileiiriere(l o;_, [);:;r,rrbt: ,l ?t-'i 3 anr':urr[ing rc P31,810 were
not reci:rded,

4. Collection of P15,275 on Ociobr:r 31, 21013 1.rcrn Cetl,e,y ':':rr.i,ilii was :r*ditecj lo rhe account
of Supreme Mercantile.
5, A promissory note was issued by a customei' to San Felipe Trading for goods purchased
worth P168,000. The promissory note carries an interest of 12o/o per annum with a term of
60 days, value dated November 15, 2013. -ihis was reflected as part of accounts
receivable. No interest was accnled as of ),ear-enci.

6. Bad debts are provided based on 2o/s oi' outstandinq accounts receivable at the end of the
year.

A physical count of merchandise on hand rryes rnade on December 30 and 31, 2013, which
ref iected a balance of P3,873,000. Your re,/ieu/ of lhe inventory list disclosed the following:

1. Goods costing P148,000 sl-iiprpsd FOit shipping point c'n December 30, 2013 by a supplier to
San Felipe was received on January':,7C14, The purchase was recorded on December 30,
2013.
2. Goods costing P195,000, shipped FOB destinaticn by the supplrer on December 28, 2013,
were recorded and received on January 5, ?-A1.4.

3. Goods purchased In cash for P41,700 were returned to the supplier on December 22,2013.
These goods were still inc!uded in tht- ip'rqpl6r,, .crl"redule and the refund was received and
recorded on January 10, 2014.

4. Goods consigned to San Felipe totaling P89,500',vere included in the physical count.

5. Included in the physical count were qood:; sorci to a customer on FOB shipping point on
December 27,2013. These goods witrr a sal!,ng price of P52,830 and a cost of P35,600
r,vere already recorded as sales on acc:rn!: i-:'-ri '3;3 shrpoed only on January 5,2AI4.

Prepayments consist of:

Prepaid advertising ?'114,040
Prepaid rent 165,0110
Unusecj office and store supplies _ 1e9-_Qgg
Tolal B3e-080
Prepaid advertising consists of paymeni 'rr :ir ;rir,,er-tisiflg agency for the design of newspaper
ad which will run for a period of one year f:onr .uit). 31, 2013.

San Felipe renewed its 5-year lease contract cn t:re office building which expired on October 31,
2013. Total advance rental for 3 months yuas rrade amounting to P165,000 was booked as
Prepaid rent.

The cornpany books purchaseo office supplies as irventory, The expense is normally taken up
after the physical count is made at year-end. Orr july 9, 7A13, a total of P38,450 worth of
suppiies was bought and included in the inv:niory. As of year-end, unused suppiies inventory
per physical count amounted to P53,200, l.lo eni:ry lo set up the expense was recorded,

San Felipe's propefty, plant and equipment consist cf lhe following:

Furniture and equipment Pi,045,000

Delivery equipment 1,637,000
Leasehold im provements __ lsJ-aQ0
Total P3,0.:i5,000
Accu rn u lated depreciation _ (916,s00)
Net book value P2J_Q&lgA

The building under lease was renovated .r a cos[ of P363,000 which was booked as leasehold
improvements on September 30, 2013. -i'hes: irrrprovements will be amortized over 5 years.
No amortizatlon was recorded as at December ii,
2013.

On May 3L, 20L3, the company bought new corrii-.'uters totaling p325,000. In addition to the
cost, it paid additional charges which were taken Lip as Repairs expense. These are delivery
charges - - -
P12,500; installation cost P11,300; ann testing cost P6,5?-0. The computers'
Paoe 10 o1' 'i.ri Paces
 LyA Ktrvrtrw >LFIULTL Ur I Ht pHtUpplllL5 (CPAR) - I\iANI.A FIN/,.1 PRE BOARD EXAMINATION
AUDffiNG PRoBLEMS IEPIE!1!.E& j5*zll!3 llule4,y I B:00AM - 11:00AM

useful life is 4 years. No ;deprecration was providecl or-i thr,: equiomeni as of December 31,
20 13,

San Felipe tradin( opened additional stores in nearby localities. To service more deliveries,
additional 3 units of deliver:y equipment were bclught on instailment basis on December 29,
2013' The installment price was P1,200,000 i:r-rt the cash price was P1,000,000. The terms are
P200,000 down payment and the balance p*yable in four equal quarteriy installments, A non-
interest bearing promissory note was issued for the unpaid portion on December 30, 2013. The
down payment of P200,000 was recorded as a debit t-o Deliverv equiprnent and a credit to Cash.

Included in the company's unacJjusted trial bralance on Lrecerrber:1,20i3 are Accounts

payable and Accrued expenses of P523,100 and P63,1.00, respectively. Upon verification, the
foliowinq information was discovei-ed:

1. On December 26,201"3, the company puirchased on account qoccls wortl'l P215,000, but no
entry was r.nade in the books. The goods were ejlready inciurleo in the year-end physical
count,

2. The following items were erronecuslr,r inciuded ii-r accourts pa;,abre:

. Accrued expenses totaling p37,4SA

n A cash advance from lhe president crf San Felipt_. amouniing to p:15C,000 lc be used as
working capital. This will be repaici within 6 months',r.ithout interest.
. A debit balance af PE7,250 represeniing adve nce pavment tbr goods ordered to be
shipped by the supplier on January lZ. ?.A1.4.

3. Your review of subsequent paynignts frorn Ja;ruar5r 2 - 15, 2014 revealed that no accrual
was made on December 3l, 20i3 for the folioir,rirrc;:
I

. Light and ,vater for l.;ov. a'rr, Dec. 2J-3 i- 2i,:t( 0

. Telepnone bills for Dec. 20.3 1c, 1 !0
. Representation expenses for Dec. ?01j L i,990
c Minor repair of a deiivery car on Dec. 25, 2L)1.3 3.r30
o Transportation expenses fc:r 2At4
rotal - 1..1[l
P-.5i1,|.)&:
i

san Felipe Trading was granted a credlt lrmit ci ui tc i)5 r'r ilro i-y liercur"t,ii Bank. As of year-
end, availments are as follows:

t/alue Date Due Date pfl-n_c_,ksl

July 1, 2013 July i, 2015 p S00,fjrl0 _h+UeSl_E:r.tig
1jL,i,
Sept, 1, 2013 Sept. 1", 2016 2,3C0,0t10 Liro/c
Dec. 1, 2013 Dec. 1, 2017 _1,.!e_Ci$j$ iS%
P4.qAu]g!
The company issued P1,200,000 face vaiue cf 1lolo bonrjs.rr ,-)ili- orr.'r:l'i 1, ,i013 maturing on
July 1, 2018 and paying interest seini-ani:uatly or Jar:rijqi 1 find IL;iy 1.

A 36' The cash balance per bank staten"rent on Dorernber.iJ, i(ri3 ';
A. P984,020 B. ?g^6,i"?_0 i" -
),- n, ,-.ii i;. D748,32.0
i

B 37. The adjusted Cash in bank baiar"rce at Der_erni.rsr 3.;", jit.L.l rs

A, P746,22A R, P7A(],?}"A c. :.-7ltr;,.i20 D"
-P702,600
D 38. The adjusted Petty cash fund Lralance al [.,ecerrrcr 3.1, u].r..r._r i!
A. P15,700 B. P?9,200 C. P35,00r1 ii )9,900

A 39. What is the carrying value of the investnrent li \l/illiarn Lin..s oit iiec,':rrrbei 31, 2013?
A, P75,000 B, p59,300 {-. F. 0 , D. pt56,372
 _-- SEPTEMBER 15. 2013 / SUNDAY / E:uuAM - 1r:uuAl"r

A 40. What amount of unrealized loss should be shr:wn in the 2013 statement of comprehensive
income as component of other comprehensive income?
A, P17,600 B. P32,600 C. PO D. P33,300

C 41. The Accounts receivable balance at tlecember'31, 2013 should be

A. P1,211,330 B. P1,209,3i0 c. PL,249,334 D. P1,354,990

B - 42. What is the year-errd acilustment L,:the A.litwancc ior doubtful accou nts?
A. P13,987 B, PI4,7Bi c. ?L4,027 D, P16,900

C - 43. What is the adjusted Inventory on December 31-, 2013?

A. P3,979,300 B, P3,854,200 c. P3,889,800 D. P4,084,800

B 44. How much Sales should be reporte| in the 2-013 income statement?
A. P4,820,000 B. P4,798,984 c" P4,709,484 D. P4,816,2L0

D 45. The total Prepayments at December 31., 201"3 shculd be

A. P153,750 B. P257.,2A4 P247,200 c. D. P|9Z,2A0

D 46. The total cost of the company's Proper"ty, plant and equipment at December 31, 2"013 is
A. P3,868,800 B. P4,A7532A C. P4,238,320
D' P3,875,320

B 47. What is the net book value of the cornpeny's Fi'operty, plant and equipment at December
3t,201,3?
A. P2,862,332 B. P2,868,852 C. P3,23L,85?- D' P2,938,820
B 48, The adjusted balance of Accounts p;ryable at December 31, 2013 is
A. P437,900 B. P543,900 c. P395,900 D. P738,900

C 49. The adjusted balance of Accrued expenses c'n December 31, 2013 is
A. P157,630 B. P54,52i: c. P155,070 D. P57,080

D 50. The Interest oayable at December 31, 2013 sltould be

A. P230,500 B. P72,A0A
/ ZTUVV \-. rP193,000
LJJtwww c. D, tP265,000
LvJl

ooo0OGooo--------

FROBLEM NO.9

presented below are two independenr sicuar-;on:;. Answer the questions at the end of each
sltuation.

you have been assigned to audit the financial statenrents of ZAIDE COMPANY for the year
ended December 31, 2013. You discover the fbilr:wing situations.

1. Interest income of P45,000 was not ar.i:ruerJ at the end of 201?-. It was recorded when
received in February 2013.

Z. A computer costing P12,000 was expensecj v,rlten purchaseci on

juiy I, 2012. It is expected
to have a 4-year life with no resiC:,ai i';,.ltie. The company typicaliy uses straight-line
depreciation for all propefi, plant, aild rql;:1'L31i1.

3, Research costsof P99,000 were incurrt:ri early in 2072. They were capitalized and were to
be amortized over a 3-year periocl. F,nortization of P33,000 was recorded in 2012 and
P33,000 for 2013,

4. Cn January 4,2012, Zaide leased a Lrr:iiCing fcr 5 years at a nionthl), renLal of P24,000' On
that date, the company paid the fnllor,vinE ar-ncunts, which were expensed when paid,
Security deposit P 60,000
First month's rent 24,000

lf-aa l'; :,1 i,1 Dlcae

 ororrrnu o*orarr'J '" "'""''tt"t'^^'' k-2or:-
r suruonv i g:ooeu

Last month's rent - ?:' !-i-ri:

i ,:LQ!.1":01
5, The company.received P108,000 from a custonrer aI the beginnii"rg of 2L:12 fcr services that
it is to perform evenly over a 3-year period beqinniiig in 2012. rlcne of the amounf .:
received was i'eporteo as urrearned re';enue at il"r:: eild fi'?$:2.

6. Merchandise inventory costrng P54 600 was in il-re v,rarehouse art Dacember 31,2012 but
was incorrectly omitted fronr the phvsical count ;:t thai dete The cornpany uses the periodic
inventory rnethod
Assume all amounts are material and ignore iircorne tax effects

A 51. Zaide's net income in 201? is understatecl by

A. P56,100 B. P53,4riC C P54,iC0 D. P89,400
B 52. Zaide's net income in 20 j3 is cverstatcd by
A. P32,4Ci0 B. p]3.61, C" p102,900 D. p30,900

A 53, The retaineo earnings reuorted on Zaide's statement ct financial position at December 31,
201-?. is undersia,,:ad L,;'
A. P22,500 B. p28,500 C. p2-4,i100 D. p58,500

LOVEY CORPOMI-ION has used lhe dc,rrudl basis:rt acil'rr,tirq fcr se..,e:'al ycars, A i'eview of
the records, however, indicates that sorne experrses ani re'lt:niles haye been handled on a cash
basis because of errors made by an inexperienced bookkeep,er.. inccme statements prepared
by the bookkeeper reported P870,000 net income for Ztt? and P1,110,000 net income for
2013. Furlher examination of the records re\/eals tlrat tfte foiiowing items were handled
improperly.

1. Rent was received from a tenant iri Decenrber 2012 i'he anroil;.t, P30,000, was recorded -..::
as income at that time even though the rental pe:'tairi;:o lr: .2.11*,

2. Wages payable on December 31 ll.ive been c,';nsrstr-.r':tll ilr,iirtr,.i frcm tt:e "ecords of that
date and have been enterecj as exljenses i\i:ci: l:ii.j in :r] ,.j,ir,,/iit( ,cti -{-he amounts of
accruals recorded in thiis manner \rere:
December 31, 2rJ11 Ll,."1,''r
December 31, Z0IZ 3b, LlCi
December 31, 201-? 28,2C4)

3. Invoices for office supplies pi;rchaseci lr;v,t ,,rtr,;-, i.",;.:,i 1,:r) '.'r :,. _ Lr-,ri., acccunts when
received. Inventories of supplies on hancj ai'.le 1::r f,i i',, r',1r-i1 f i:,:ir l,.i\r(,t reen ignored, and
no :ntry has Deen made ior rhe:lt

December 31, 2011 P39, rj ilr

December 31,,201-2 28,,iltt,t
December 31, 2013 /").,64C

A 54. What is tne corrected net incorne ior the year ZC1.Z)
A, PB26,2AA B. PB{J6,200 C, FB3_1,21(; D. p901,000

A 55. What is the corrected net inccme fcr 2013?

A Pr'162'2a0------:----B---ll:]-']:i!l-oooo**to"l]:-ll:t'l:l
-- "- ?--li:113'000i
PROBLEM NO. 10

The following are two (2) unrelated situatioirs. .{nswer :lre question:; at the end of each
situation,
 CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) - r,rAli1l- r FINAL PREBOARD EXAMINATION
AUDmNG pROBLEMS __-SfptfNgER t5, 2013 / SUNDAY / 8:00AM - i1:00AM

OMEGA COMPANY sells its products in expensive, reusable containers. The customer is charged
a deposit for each container deliverecj anci receives a refund for each container relurned within
two years after the year of delivery. Omega accounts for the containers not returned within the
time iimit as being sold at the deposit amount. Information for 2013 is as follows:

Containers held by customers at

December 3L,20L2,
from deliveries in: 2011 85,000
aAL? 240-!0Q 325,000
Containers delivered in 2013 430,0C0
Containers returned in 2013
from deliveries in: 2Al7 57,500
2CL2 140,000
2013 152_aq0 3s4,soO

C 56" How much revenue frorn container sales shcitid be recognized ior 2013?
A. P127,500 B. P267,5A0 C. P27,500 D. P85,000

A 57. What is the total amount of Omega Corrrpairy's liabiliby for retr,rnable containers at
Decenrl:er 31, 2C13?
A, P373,000 B, P400,500 c. P267,500 D, P430,000

DP, iNC., a dealer of household appliances. seiis u,ashing machines at an average price of
P8,100" The company also offers to eaci-t custorrer a separate 3-year wart'anty contract for
PBl"0 that requires the company to provide pei'iodic maintenance services and to replace
defective parts. During 2013, DP sold 300 washing rnachines .rnd 270 warratrty contracts for
cash. The company estimates that the rrrarranl'/ r-..,:jts are P1B0 for pats and P360 for labor.

Assume sales occurred on December 31,2013. DP's policy is to recognize income from ine
warranties on a straight-line basrs. In 20.14, DP rncurred actual costs relative to 2013 warran0z
sales of PlB,000 for parts and P36,000 fcr labcr.

C 58. What liability relative to these tra:rsarcrion,; r./ould appear on tl^,e December 31,2013,
statemeni of financial position and l':otr,r vitould tt be classified?
Current NPfqU[si,l
A, P145,800 P72,900
B. P72,900 P72,900
c. P72,900 P145,800
D^ P0 P218,700

D 59. What amount of warranty expense lvuuld be shown on the incor;ie statenrent for the year
ended December 3L, 20t4?
A. P18,000 B. P 0 C. P 36,000 D. P54,000

B 60. What liability relative to the 2013 r,varr';ini:i:,; rrvculd appear on the December 31,2014,
statement of financial position and ''rov'.' r,'i-:,.rrr-1 il re ciassifir'd?
Current Noncurren i
A. P145,800 P72,9AA
B, P72,gO0 P7Z,9O}
c. P72,900 P145,800
D. P145,800 P0

---END CF TXAMINATION---
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
AUDITING PROBTEMS
FINAL PRE- BOARD EXAI.{II{ATION September 15,2013

PROBLEI*I ,. - TGR Company

1. F Trade-in - June 30. 2011
Cost PL57,2oO
Accum. depreciation , L!1,1W - 681fi1(Pl57,200 x20o/o x 2.5 yrs.) 78.600
Carrying value 79,6W
Trade-in value 129.000 P50,400
Sale-Jan.f,20i2
Cost P132,000
Accum depreciation ,Lfil}g - UUl? (P132,000 x?^Qa/o x 3 yrs.) J92W
Carryirig vaiue 52,800
Net proceecls 7L.Z5A 18,450
SE--Adahei 1.20,13
. Cost P120,000
Accum del:reciation , ULl09 * rcfifi3 (P120,000 x20o/o x 4 9lt2) 114.000
Carrying value 6,000
Proceeds 24.000 18,000
Total gain e86.850
2. C (Pi80,000 + P6,000) + (P2 ,0,0C0 x 98%) + P279,000 PZ0020a
3. C (P186,000 x20o/ox43/L2) + (P235,200 x}Aa/ox36/t2) + (P279,000 x}Ctr./ax26/LZ) P462.24O
Date of
AEgurg.!figl Cost 20@ zzu 2011 20t2 2013 Totat
1,/U09 P157,200 P3tr,440 P3l,44A P15,720 PO PO P 78,600
120,300 24,000 24,000 24,ff)A 24,W0 18,000 114,000
132,000 26,400 26,400 26,400 0 0 79,204
9l30lm 186,0o0 9,300 37,200 37,200 37,200 37,200 158,10O
6l3O/tO 235,20fi 0 23,524 47,M0 47,M0 47,444 L@,640
6130/7i_ 279,000 _0 0 27,9N 55.800 __55940 139.s00
Correct depreciation P97,L40 PL42,Sffi PL78,zffi P164,M0 P158,040 P734,A4O
Depreciation per client 97,440 Ls4.7tl 1s3i02 108.791 82.233 597.018
Over (under)statern:rnl E5*04 ? 12.152 (P 24.4s8) rzus24gJ GJLSOZ) {PJ3ZAZZ)
4.8 5.4
PROBLEM 2 - hlA$A{xAI; IilC.
6. B Inventory, Juiy 1, 20i.2 (1,75,000 + P1.9,500) P94.500
7. D Purchases (P540,000 - P8,100 +P27,900 + P16,200) Ps75.000
8. A Inventory,, June 3O 2013 (P105,000 + P27,9AA +P11,100) P1S1.000
9. A Accounts payable, June 30, 2013 (P27,900 + P16,200) P44.100
10. C P94,500 + P576,000 = P67C,500 - P144,000 P525-500

PROBLEMS-TANDEMCO.
11. A Outstanding checks, Nov, 30 P170,000
Add: Checks issued in December:
tsook disbursements P4A7,240
Cost of checkhook (1,200)
Error in recording a disbursement (P39,600 - P3,960) (3s.640) 370.360
Total 540,360
Less: Checks paici L"y bank:
Bank ciisbursernents P204,000
Decerrrl.,er banx seruice charges (1,600)
Custorner': rctt,r ned check (24.000) 178.400
Ourtstandlng clr*cks, Dec. 31 P36i360
12. C Deposit in tiafl$,t, Nov. 30 P 80,000
Add: Collecti+ns:
tio.lk receipts P735,600
l'.icte coiiected by barrk in November (100,000)
CPA REVIEW SCHOOL OFTHE PHIUPPINES (CPAR) - MANILA
AUpmNG PROBLEMS I "---__--IIUAL gMeaABD 0(AUJMIISX
I

Note sent to tlrre bank for ctrtlection (12L000) 5ts-609

Total I 595,500
Les: Deposits credited by bank:
Bank receipts l
P41S.CI00
Correction of erroneous November charge ($.e00) 376.000
Deposit in transit, Dec. 31 P219-600

Nov-30 EeeejBS; -DS[ursements Dec-31

tsook balances P157,200 P735,600 P407,200 P485,600
Note collected by bank in November 100,000 (i00,000)
Cost of checkbook (1.200) (1,200)
Service charges 1,500 (1,600)
Customer's returned check 24,000 {?-4,400)
Note with bank recorded as receipt (120,000i (120,000)
Overstatement of d isbu rsement _135,$39) __35"6t0
,Adjusted book balances P515,e00 e3S5"96! .e375.64!
"B25S,gl0
Uur-30 ik$e195 D;Strtillelnerils Aee* jl
Bank balances F:i(]b,000 P'+i5,000 ,1204,00{) P5i8,000
Erroneous bank charge 4C,000 i+i),irCIf)
Deposits in transit
Novemhr 30 80,u00 i8!,00u1)
December 31. :i19,fio0 219,600
Outstanding checks
November 30 : (i70,00(}) (r.7c il?())
December 31 .(36L960)]
Adjusted bank balances E2:f;"ffiq ffl.I,k*"]
-i,:.l*li.gg
P3,?3300 Pl,-',s,ffo
13. A 74. C 15. A
PROBLEM 4- MINA MINING CO.
16. C ___yeer_L-
Derlcilen -Deeresiatia!
Mineral property (P323 x 7,500) P2"4:11.5U0
Building (P80 x 7,50CI) P600,000
Machinery G/2) (PtZx 7,500) 9C,0fi0
Machinery Glz) (P24 x 7,500) _"r.80"900
,5l;ti?"519 P,SZSSS{}
77. D --- --
Va:. g--_
E r-
-

----l-se!:
Ile.ne&or Pepieaalim
Mineral propety (P323 x 15,000) p4 s, 5 000
Building (P80 x 15,000) Pi,200,000
Machinery (112) (P12 x 15,000) 180,000
Machinery $12) tP24 x 15,000) __ie0$00
P3fi#i,t00 r,l*Z*0,400
18. C -- - ".,-YeaL(- ----_-_--
-."-
[:r.:#etLr"U Dspresratlon
Mineral property (P323 x 15,000) I:4,84ii,fr00
Building (P80 x 15,000) P.:,200,000
Machinery Glz) (P72 x 15,000) i.80,000
Machinery {U2) (P24 x 7,500) _.1mgr0
flf,5#.L.000 P*ks8.CI00
19. C Yeer 7
pen;ri{bn Deprexratiu
Mineral propeflry (P323 x 15,000) rr4,b45,0{)0
Building (P80 x 15,000) rr1,200,000
Machinery G/2) (P12 x 15,000) I 90,000
Machinery (1/2)
11*ii*i-{$O P.iJ$0s00
24. D -------""---Yea:JL--
0egie-tr-rfi .l=)epreciation
Mineral property (P323 x 7,500) P7./t2"?.st-]CI
Building (P80 x 7,5A0) , i00,CI00
Machinery Ul?) (P12 x 7,500) 9i,e00
Machinery (112) .,'-- .::
l;;i;,.xin
I rft!,'trr.,c6)H r$D0,0gl
cPA REVIEW SCHOOL OFTHE PHILIPPINES (CPAR) - MANILA
AUDM- FINAL PREBOARD EXAMINATION

PROBLEM 5.sANTOL CORP.

2t. D 22. A ?3, A
24, A Proceeds from sale of Eloy P1,600,000
Carrying value 1.610.000
Loss on sale L10,0@
25. D Proceeds from sale of Kelly P2,300,000
Carrying value (P1,450,000 + P500,000) 1.950.000 P350,000
Loss on sale of Kongga (e0.000)
Net realized gain on sale P260.000

PROBLEM 6- DOFINA MANUFACTURIilG COMPAHY

26. A Patents (P2,550,000 - P510,000 - PX.20,000) P1.q20.000
27. B Licensing agreement 1 (P1,500,000 - P900,000) P500,000
28. D Licensing agreement 2 (P1,470,A00 + P30,000) P1.s00.000
29. A Leasehoid improvements (P780,000 * P330,000 - P90,000) P360.00!
30. A Retained earnings - debit (n00,000 + P720,000'+ F45,000 + P870,000) P2.s35.000

PROBLEM 7 - SALIIYOT COMPANY

Required
Net Debit Adjusted
Age Ealance AdjustmenE Eatilsc Rate Allowance
0-1 month P372,960 P8,000 P380,960 7o/o P 3,810
1-3 months 307,280 2,000 309,280 2o/o 6,186
3-6 months 88,724 88,720 3o/o 2,662
Over 5 months 24,0A0 (4,000) 8,000 59o/o 4,000
2.400
12.000 20o/o
P7q8.q60 P19 058
31. B 12. B
33. A (P798,960.- P19,058) P77q.9O2
34. A P23,640 -'Pt,296 = ?22,34 + P1,295 * P10,296 a3.ifi
3s. c
PROBLEM 8 - SAN FELIPE TRADING CORPORATIOil
36. A Cash balance per bank statement P984.020

37. B tsoot Bank

Unadjusted balances P681,200 P984,020
Erroneous bank credit (195,000)
Postdated checks (40,000)
Unreleased check 115,000
Understatement of baok disbursement (P21,000 - P12,000) (9,000)
U nrecorded disbu rsernent checks
(4,750)
Unrecorded transfer of fund (59,300)
Interest earned 5,720
Outstanding cnecks (132,000)
. Deposit in transit {Pi39,200 - P40,000) 49,200
Unrecorded cailecliens 17.350
Adjusted balances P706.224 P7A6.220

38. D Adjusted peity cash funrl (P35,000 - P19,300 - P5,800) P9 900

39. A TradrnE securities at FV (William Lines) (P15 x 5,000) E25,000

40. A Unre.liized ioss (P314,60C Cost - P297,000 FV) 817.600
4L. C Accounls receivable per books Pt,452,7ffi
Postdated check 40,000
Unrecorded collections (17,350)
Customer's deposit 38,000
Cash advance to an officer (75,000)
Unrecorded sale 31,810
Prornissory note received from custorner (168,000)
Unshipped goods (s2.830)
Adjusted balance P1.249.330

42. B Increase in allowance (P7,249,330 x2o/o = ?24,987 - P10,200) P14.787

cpA REVTEW SCHOOL OFTHE PHIIiPPiNES (CPAR) - MANILA
AUDmNGPRoBLEMS , - , ____L],NAL$,EE"EABDEXAUI$ATIQN

43. C Adjusted inventory (P3,873,000 + P148,000- P41,700 - Pltil.sCIO) eL.s8g800

44. B Adjusted sales (P4,820,000 + P31,810 - P52,ti30) P,1,798-980

45. D Prepayments per books P438,000

Adveftising o(pense (P144,000 x SILZ) (60,000)
Rent expense (P165,000 x2l3) (110,000)
ffice supplies expense (P129,000 x P53,200) (75.8m)
Prepayments, as adjusted P192.200

46. D Total cost of PPE per books P3,045,000

Additional charges to computers bought (P12,500 + Pi.i.,300 + P6,520i 30,320
Unrecorded cost of delivery equiprnent (Pl,0m,000 * P200,000) 800.000
Adjusted cost of PPE P3 875.320

47. B Total cosr of PPE P3,875,320

Accumulated depreciaticn per books p93o,500
Depreciation - Leasehold improvements {P363,000/5 x 3,112) 18,150
Depreciation - Computers t?355,320 4 ><7 !i2) -s-t"&l$
_ttgg6,{68)
Adjusted net book value PL85&.852

48. B Accounts payable per books P523,100

Unreleased checks 1.15,m0
Understatement of book disbursemenls iP2L,0C0 - P1i,O(iC.l (9,000)
Unrecorded purchase 215,000
Accrued expenses {37,450)
Cash advance from the company presiCeni (350,000)
Advance payment for goods ordered erroneoirsiy debiteri tc ntcoLl::fs payable 82250
Accounts payable, as acijusted Ps43-900

49. C Adjusted accrued expenses (P63,100 + ?37,15A + P5'1,520) P155.070

50. D Secured bank loans (P32,500 + P13E,000 -i P22,500) + i)7.:,(.rCS P2$5X40

PROBLEM NO. 9 - ZAIDE COMPANYILOVEY e(ftPCRATIOiU

Net income over (under) RE, Dec, 31,2013
2012 2013 Over Gtdgrj leZ 2013
1. P(45,000) P45,000 P - Net incorrre, ;rs rr;raried p,6.r$,000 P1,110,000
2. (12,000) (12,0C0) 1. {3- 000) 30,000
t,uT 1,500 ; ^
(.{,1't0fi,\ 7,800
3,000 3,000 :i. _1-i-!L80i:) L4.400
3, 99,000 99,000 Correct{rd "r'1: il'corilF: i:hr5r$0 P1J5Z.200
(33,0m) (33,000) (66,0to)
4. (84,000) (84,000)
5. 72,400 (36,000) saml
6. (s4.600) 54.60q
Pf56,100) P33-600 Pr22l0o)
51. A 52. B 53" A i", " A. 55. A
PROBLEM NO. 10 - OMEGA COMPAT{Y/DR rNC.
56. C Revenue from container sales (P85,000 - P57 ste) P27sW
57. A Liability for returnable containers, Dec. 31, 2012 P325,000
Deliveries in 2013 1l!J00
Total 755,000
2013 container returns P35.4.500
2013 container sales A\"58i (382.000)
Liability for returnable containers P_373-000

58. C Unearned warranty revenue:

Current (P810 x 270 x U3) P72-900
Non-current (P810 x 274 x 43) 8145.S00
59. D (P18,000 parts + P36,000 labor) P54.000

60, B Unearned warranty revenue:

Current (P810 x27AxU3) ?77500
Non-current (P810 x 27C x Ll3) PJEgIP
---END*-