APPLIED AUDITING 2018 EDITION

UPDATES AND ERRATA NOTIFICATION

AS OF October 12, 2018

The following updates are for the Applied Auditing 2018 Edition. Please review these items and adjust
your material accordingly. We apologize for any inconvenience caused.

CHAPTER 8 Cash and Cash Equivalents

208 PROBLEM 8-17 last additional information
Replace “January 2018” to January 2019

CHAPTER 10 Loans and Receivables

Page Remarks
314 PROBLEM 10-16
Replace “December 31, 2017” to December 31, 2020
334 PROBLEM 10-34- T-account of the notes receivable
Replace 2/31/2018 to 12/31/2018

CHAPTER 15 Introduction to Financial Asset and Investment in Equity Securities

Page Remarks
512 Accounting Treatment of Stock Split
Accounting for stock split whether split up or split down is similar with cash dividends. Upon
receipt of all the shares as a result of share split and remeasurement of all the shares to
fair value, accounting is as follows:

Replace with
Accounting for stock split whether split up or split down is similar with share dividends.
Upon receipt of all the shares as a result of share split and remeasurement of all the shares
to fair value, the journal entries are as follows:

CHAPTER 17 Investment in Associate

Page Remarks
644 Illustration Deemed Disposal
Replace Net assets were of ₱200,000 to ₱400,000
668 Sexy reported total comprehensive income in 2017 at ₱1,250,000 which is net of a foreign
translation loss amounting to ₱150,000. It also distributed dividends at year end at
₱500,000. Fair value of shares on this date was at ₱32 per share while cost to sell
remained ₱2 per share.

Replace with
Sexy reported total comprehensive income in 2017 at ₱1,250,000 which is net of a foreign
translation loss amounting to ₱150,000. It also distributed dividends at year end at
₱500,000. Fair value of shares on this date was at ₱30 per share while cost to sell
remained ₱2 per share.
669 PROBLEM 17-9
Replace Cristian with Cristina

CHAPTER 19 Property, Plant and Equipment

Page Remarks
738 Asset (unamortized balance of deferred income - govt. grant) XX
Loss on government grant XX
Cash XX
Accumulated depreciation XX

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 Replace with
Asset (TOTAL amount of deferred income - govt. grant or XX
amount repaid)
Loss on government grant XX
Cash XX
Accumulated depreciation XX
773 PROBLEM 19-2
On March 1, 2018, Levy Co. acquired land and building by paying ₱6,000,000 and
assuming a mortgage of ₱1,500,000.

Change to:
On March 1, 2018, Levy Co. acquired land and building by paying ₱8,000,000 and
assuming a mortgage of ₱1,500,000.
774 PROBLEM 19-2
On March 1, 2018, Romie Milan Co. acquired land and building by paying ₱9,000,000 and
assuming a mortgage of ₱1,000,000.

Change to:
On March 1, 2018, Romie Milan Co. acquired land and building by paying ₱11,000,000
and assuming a mortgage of ₱1,000,000.

CHAPTER 27 Long-term Financial Liabilities and Debt Restructuring

Page Remarks
1051 Retirement Price (1.5M x 104%) ₱1,560,000
Less: Carrying value 1,538,052
Loss on sale recognized directly through equity
(i.e. Retained earnings) ₱ 21,948
Replace with:
Loss on sale to OCI and subsequently closed to Retained earnings

CHAPTER 27 Income Tax

Page Remarks
1222 Requirement 5
Replace (355,000 x 30%) to (335,000 x 30%)
1225 Requirement 7
Replace Income tax expense to Net income

CHAPTER 30 Employee Benefits

Page Remarks
1289 PROBLEM 30-10
Replace “December 31, 2012” to December 31, 2022

CHAPTER 33 Share-Based Payment

Page Remarks
1377 No of stock options for 2019
Replace 443,000 to 44,300
1387 B. Not beneficial to the employees
1. Decrease in fair value of the equity……. (e.g. by REDUCING the exercise price)

Replace REDUCING by INCREASING

1388 Decrease in fair value of the equity……. (e.g. by REDUCING the exercise price)

Replace REDUCING by INCREASING

1429 PROBLEM 33-15 Comprehensive
Please insert the word “average” before the “revenue growth projection”

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DEBT SECURITIES (ASSET AND LIABILITIES)
Alternative computation for the present value end of the year for interest bearing debt instrument
with unreasonable interest rate or non-interest bearing note is:
1. For Assets (e.g. investment in debt securities, loan receivable, etc.)
Present value end of the year = [(Present value beginning of the year X (1+ (effective interest
rate x months outstanding/12)) – TOTAL collections - Accrued Interest]
2. For Liabilities (e.g., notes payable, loan payable, etc.)
Present value end of the year = [(Present value beginning of the year X (1+ (effective interest
rate x months outstanding/12)) – TOTAL payments - Accrued Interest]

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A. Page 594. The total of Probability Weighted Cash Shortfall of .88M is the rounded
(₱875,049) present value of cash shortfall.
B. For pages 613 and 614, please see updates highlighted in red.
SUMMARY OF RECLASSIFICATION OF FINANCIAL ASSETS
FROM FA at FVTPL TO FA at FVTOCI TO FA at Amortized Cost
Initial measurement At fair value, reclassification date At fair value, reclassification date.
Fair value = New gross carrying
amount
Computation of:
1. Gain or loss on Fair value XX Fair value XX
reclassification Less: Carrying amount XX Less: Carrying amount XX
date Reclassification gain Reclassification gain
or loss- P/L XX Or loss- P/L XX
(Subsequent fair value changes to
OCI)
2. Interest income New effective interest rate on the New effective interest rate on the
in the year of basis of the fair value, reclassification basis of the fair value,
reclassification date X fair value, reclassification date reclassification date X fair value,
reclassification date

FROM FA at FVTOCI TO FA at FVTPL TO FA at Amortized cost

Initial measurement At fair value, reclassification date At fair value, reclassification date
Previously recognized unrealized gain Previously recognized unrealized
or loss in the OCI is reclassified to P/L gain or loss in the OCI is adjusted
against the fair value.
Computation of:
1. Gain or loss on Fair value XX No gain or loss on the
reclassification Less: Carrying amount XX reclassification date to be
date Reclassification gain recognized in the P&L
or loss- P/L XX
2. Interest income Nominal rate x face value Original effective interest rate X
in the year of fair value, adjusted against the
reclassification previously recognized unrealized
gain or loss
SUMMARY OF RECLASSIFICATION OF FINANCIAL ASSETS
FROM FA at AC TO FA at FVTPL TO FA at FVTOCI
Initial measurement At fair value, reclassification date At fair value, reclassification date
Computation of:
1. Gain or loss on Fair value XX Fair value XX
reclassification Less: Amortized cost XX Less: Amortized cost XX
date Reclassification gain Reclassification gain
or loss- P/L XX or loss- OCI XX
2. Interest income in Nominal rate x face value Original effective interest rate X
the year of would have been PV on the
reclassification reclassification date if the assets are
FA at AC.
Applied Auditing 2018 Edition by Asuncion, Ngina and Escala

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