Auditing Problems v.1 - 2018

AUDITING PROBLEMS

PROBLEM NO. 1 – AUDIT OF PROPERTY, PLANT, AND EQUIPMENT (PPE) The TGR Company commenced operations on January 1, 2014. 2014 . account is shown below. Date Jan. 1, 2014 Purchase

Particulars

Debit P157,200 120,000 132,000

Sept. 30, 2014 Purchase on installment Payments from Sept. to Dec. Oct. 3, 2014 Freight and installation Dec. 31, 2014 Depreciation 2015 Installment payments for acquisition on Sept. 30, 2014 June 30, 2015 Purchase Dec. 31, 2015 Depreciation June 30, 2016 Acquisition – Acquisition  – trade in of old machine Dec. 31, 2016 Depreciation Jan. 1, 2017 Sale Dec. 31, 2017 Depreciation Oct. 1, 2018 Sale Dec. 31, 2018 Depreciation

The company’s machinery

Credit

Balance

P409,200

72,000 6,000 P97,440 144,000 240,000 154,752 150,000 153,802 71,250 108,791 24,000 82,233

481,200 487,200 389,760 533,760 773,760 619,008 769,008 615,206 543,956 435,165 411,165 328,932

The details of the transactions are as follows: a) On September 30, 2014, a machine was purchased on an installment basis. The list price was P180,000, but 12 payments of P18,000 each were made by the company. Only the monthly payments were recorded in the machinery account starting with September Septembe r 30, 2014. Freight and installation charges of P6,000 were paid and charged to the machinery account on October 3, 2014. b) On June 30, 2015, a machine was purchased for P240,000, 2/10, n/30, and recorded at P240,000 when paid for on July 5, 2015. c) On June 30, 2016, the machine acquired for P157,200 was traded for a larger one having a list price of P279,000. Allowance of P129,000 was received on the old machine, the balance of the list price being paid in cash and charged to the machinery account. d) On January 1, 2017, the machine acquired on January 1, 2014 with cost of P132,000 was sold for P75,000. The cost of removal and crating totaled P3,750. e) On October 1, 2018, the machine purchased on January 1, 2014 was sold for P24,000 cash.  Assume a 55-year useful life for TGR Company’s machinery.

Page 2

1. What is the total amount of gain on the sale/trade-in of the machinery acquired on January 1, 2014?  A. B. C. D.

P50,400 P40,200 P36,450 P86,850

2. What is the adjusted balance of the Machinery account on December 31, 2018?  A. B. C. D.

P694,200 P705,000 P700,200 P703,950

3. What is the adjusted balance of the Accumulated depreciation account on December 31, 2018?  A. B. C. D.

P465,600 P457,140 P462,240 P397,740

4. What is the correct total depreciation provision for the years 2014-2018?  A. B. C. D.

P737,400 P734,040 P728,940 P669,540

5. The entry to correct the depreciation provision for the years 2014-2018 should include a debit (credit) to  A. B. C. D.

Depreciation Expense P75,807 (P18,492) P18,492 P75,807

Retained Earnings P61,215 P79,707 (P79,707) P55,249

Page 3 PROBLEM NO. 2 – AUDIT OF CASH The cash account of NUNAL COMPANY shows the following activities: Date Nov. 30 Dec. 2 4 15 20 21 31 31

Debit Balance November bank charges November bank credit for notes receivable collected NSF check Loan proceeds December bank charges Cash receipts book Cash disbursements book

Credit P

150

P 30,000 3,900 145,500 180 2,121,900 1,224,000

Balance P345,000 344,850 374,850 370,950 516,450 516,270 2,638,170 1,414,170

CASH BOOKS RECEIPTS Date Dec. 1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 23 23 26 28 28 29 29 29 Totals

OR No. 110-120 121-136 137-150 151-165 166-190 191-210 211-232 233-250 251-275 276-300 301-309 310-350 351-390 391-420 421-480 481-500 501-525 526-555 556-611 612-630 -

PAYMENTS Amount P 33,000 63,900 60,000 168,000 117,000 198,000 264,000 231,000 63,000 90,000 165,000 24,000 57,000 27,000 51,000 63,000 96,000 222,000 15,000 114,000 P2,121,900

Check No. 801 802 803 804 805 806 807 808 809 810 811 812 813 814 816 817 818 819 820 821 822 823 824 825 826

Amount P 6,000 9,000 3,000 9,000 36,000 57,000 78,000 90,000 183,000 21,000 24,000 48,000 60,000 66,000 108,000 33,000 150,000 21,000 12,000 9,000 36,000 39,000 87,000 6,000 33,000 P1,224,000

Page 4

BANK STATEMENT Date Dec. 1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 23 23 26 28 28 29 29 29 Totals

1. 2. 3. 4. 5. 6. 7.

Check 792 802 804 EC 805 CM 16 799 DM 57 808 803 809 DM 61 813 CM 20 815 816 811 801 814 818 DM 112 821 CM 36 820

Charges P 7,500 9,000 9,000 243,000 36,000 21,150 3.900 90,000 3,000 183,000 180 60,000 18,000 108,000 24,000 6,000 66,000 150,000 360 9,000 12,000 P1,059,090

DMs 61 and 112 are for service charges. EC is error corrected. DM 57 is for an NSF check. CM 20 is for loan proceeds, net of P450 interest charges for 90 days. CM 16 is for the correction of an erroneous November bank charge. CM 36 is for customers’ notes collected by bank in December. Bank balance on December 31 is P1,776,810

Credits P 25,500 33,000 63,900 60,000 243,000 285,000 36,000 462,000 231,000 63,000 255,000 24,000 57,000 145,500 141,000 96,000 222,000 15,000 36,000 P2,493,900

Page 5 Based on the preceding information, determine the following: 1. Outstanding checks at December 31  A. B. C. D.

P459,000 P477,000 P441,000 P487,650

2. Deposit in transit at December 31  A. B. C. D.

P114,000 P139,500 P132,000 P0

3. Adjusted bank receipts for the month of December  A. B. C. D.

P2,297,400 P2,291,400 P2,303,400 P2,321,400

4. Adjusted book disbursements for the month of December  A. B. C. D.

P1,228,440 P1,246,440 P1,210,440 P1,246,620

5. Adjusted bank balance at December 31  A. B. C. D.

P1,449,810 P1,674,810 P1,431,810 P1,776,810

Page 6

PROBLEM NO. 3 – AUDIT OF ACCOUNTS RECEIVABLE (CONFIRMATION) To substantiate the existence of the accounts receivable balances as at December 31, 2018 of LUKAS COMPANY, you have decided to send confirmation requests to customers. Below is a summary of the confirmation replies together with the exceptions and audit findings. Gross profit on sales is 20%. The company is under the perpetual inventory method. Name of Customer Concordia

Balance Per Books P150,000

Falcon

P30,000

Lazaro

P144,000

Silang

P112,500

 Yakal

P135,000

Comments From Customers P90,000 was returned on December 30, 2018. Correct balance as is P60,000.  Your CM representing price adjustment dated December 28, 2018 cancels this. You have overpriced us by P150. Correct price should be P300. We received the goods only on January 6, 2019. Balance was offset by our December shipment of your raw materials.

 Audit Findings Returned goods were received December 31, 2018. The CM was taken up by Lukas Company in 2019. The complaint is valid. Term is shipping point. Shipped in 2018. Lukas Company credited accounts payable for P135,000 to record purchases.  Yakal is a supplier.

1. If the necessary adjusting journal entry is made regarding the case of Concordia, the net income will  A. B. C. D.

Decrease by P18,000. Decrease by P90,000. Increase by P18,000 Increase by P90,000.

.

2. The effect on 2018 net income of Lukas Company of its failure to record the CM involving transaction with Falcon:  A. B. C. D.

P30,000 over. P30,000 under. P6,000 over. P6,000 under.

3. The overstatement of receivable from Lazaro is  A. B. C. D.

P96,000 P24,000 P72,000 P48,000

4. The accounts receivable from Silang is  A. B. C. D.

Correctly stated. P112,500 over. P225,000 under. P112,500 under

5. The adjusting entry to correct the receivable from Yakal is  A. Purchases  Accounts receivable B. Accounts payable Purchases C. Accounts receivable  Accounts payable D. Accounts payable  Accounts receivable

135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000

Page 7 PROBLEM NO. 4 – AUDIT OF NOTES RECEIVABLE The HVR Company included the following in its notes receivable as of December 31, 2018: Note receivable from sale of land Note receivable from consultation Note receivable from sale of equipment

P2,640,000 3,600,000 4,800,000

The following transactions during 2018 and other information relate to the company’s notes receivable: a) On January 1, 2018, HVR Company sold a tract of land to Triple X Company. The land, purchased 10 years ago, was carried on HVR’s books at P1,500,000. HVR received a noninterest-bearing note for P2,640,000 from Triple X. The note is due on December 31, 2019. There was no established exchange price for the land. The prevailing interest rate for this note on January 1, 2018 was 10%. b) On January 1, 2018, HVR Company received a 5%, P3,600,000 promissory note in exchange for the consultation services rendered. The note will mature on December 31, 2020, with interest receivable every December 31. The fair value of the services rendered is not readily determinable. The prevailing rate of interest for a note of this type was 10% on January 1, 2018. c) On January 1, 2018, HVR Company sold an old equipment with a carrying amount of P4,800,000, receiving P7,200,000 note. The note bears an interest rate of 4% and is to be repaid in 3 annual installments of P2,400,000 (plus interest on the outstanding balance). HVR received the first payment on December 31, 2018. There is no established market value for the equipment. The market interest rate for similar notes was 14% on January 1, 2018. Note: Round off present value factors to four decimal places and final answers to the nearest hundred. 1. What amount of consultation fee revenue should be recognized in 2018?  A. B. C. D.

P3,600,000 P2,705,000 P4,047,500 P3,152,500

2. What amount should be reported as gain on sale of equipment?  A. B. C. D.

P994,800 P2,400,000 P1,162,700 P1,237,300

3. The amount to be reported as noncurrent notes receivable on December 31, 2018 is  A. B. C. D.

P7,482,200 P6,037,300 P5,477,500 P7,877,600

4. The amount to be reported as current notes receivable on December 31, 2018 is  A. B. C. D.

P4,800,000 P2,400,200 P4,404,900 P7,440,000

5. How much interest income should be recognized in 2018?  A. B. C. D.

P974,200 P756,000 P1,378,700 P1,160,500

Page 8 PROBLEM NO. 5 – AUDIT OF SHAREHOLDERS’ EQUITY  iBELIEVE COMPANY began operations on January 1. Authorized were 120,000 shares of P10 par value ordinary shares and 240,000 shares of 10%, P100 par value preference shares. The following transactions involving shareholders’ equity occurred during the first year of opera tions. Jan. 1 Issued 30,000 ordinary shares to the corporation promoters in exchange for land valued at P1,020,000 and services valued at P420,000. The property had cost the promoters P540,000 3 years before and was carried on the promoters’ books at P 300,000. Feb. 23 Issued 60,000 preference shares with a par value of P100 per share. The shares were issued at a price of P150 per share, and the company paid P450,000 to an agent for selling the shares. Mar. 10 Sold 18,000 ordinary shares for P390 per share. Issue costs were P150,000.  Apr. 10 24,000 ordinary shares were sold under share subscriptions at P450 per share. No shares are issued until a subscription contract is paid in full. No cash was received. July 14 Exchanged 4,200 ordinary shares and 8,400 preference shares for a building with a fair value of P3,060,000. The building was originally purchased for P2,280,000 by the investors and has a book value of P1,320,000. In addition, 3,600 ordinary shares were sold for P1,440,000 in cash.  Aug. 3 Received payments in full for half of the share subscriptions and payments on account on the rest of the subscriptions. Total cash received was P8,400,000. Share certificates were issued for the subscriptions paid in full. Dec. 31 Net income for the first year of operations was P3,600,000. Dec. 31 Declared a cash dividend of P10 per share on preference shares and P20 per share on ordinary shares, payable on February 10 to shareholders of record on January 15. Based on the preceding information, calculate the balances of each of the following accounts: 1. Share premium – preference shares  A. B. C. D.

P2,550,000 P540,000 P3,090,000 P3,270,000

3. Ordinary shares  A. B. C. D.

P528,000 P678,000 P366,000 P372,000

3. Share premium – ordinary shares  A. B. C. D.

P22,242,000 P18,660,000 P11,520,000 P21,432,000

4. Retained earnings  A. B. C. D.

P1,320,000 P3,600,000 P2,100,000 P1,740,000

5. Total shareholders’ equity  A. B. C. D.

P32,160,000 P29,760,000 P33,900,000 P31,080,000

Page 9 PROBLEM NO. 6 – AUDIT OF INVESTMENT IN TRADING SECURITIES Supporting records of MAYON CORPORATION’s trading securities portfolio show the following debt and equity securities:

Security 400 ordinary shares Concave Co. P800,000 Tipo Co. 7% bonds P1,200,000 Turkey Co. 7 ½% bonds Totals

Cost

Fair Value

P 254,500 796,500 1,207,500 P2,258,500

P 243,000 774,000 1,218,900 P2,235,900

Interest dates on the bonds are January 1 and July 1. Mayon Corporation uses the income approach to record the purchase of bonds with accrued interest. During 2018 and 2019, Mayon completed the following transactions related to trading securities:

2018 Jan. 1 Received semiannual interest on bonds. Assume that the appropriate adjusting entry was made on December 31, 2017.  April 1 Sold P600,000 of 7 ½% Turkey bonds at 102 plus accrued interest. May 21 Received dividend of P1.25 per share on the Concave ordinary share capital. dividend had not been recorded on the declaration date. July

The

1 Received semiannual interest on bonds and then sold the 7% Tipo bonds at 97 ½.

 Aug. 15 Purchased 200 shares of Newman, Inc. ordinary share capital at P580 per share plus brokerage fees of P500. Nov. 1 Purchased P500,000 of 8% Toll Co. bonds at 101 plus accrued interest. Brokerage fees were P1,250. Interest dates are January 1 and July 1. Dec. 31 Market prices of securities were: Concave ordinary shares 7 ½% Turkey bonds 8% Toll bonds Newman ordinary shares

P550 101 ¾ 101 P583.75

2019 Jan. 2 Recorded the receipt of semiannual interest on bonds. Feb. 1 Sold the remaining 7 ½% Turkey bonds at 101 plus accrued interest.

Page 10 1. What is the total interest and dividend income for 2018?  A. B. C. D.

P125,166 P164,416 P91,417 P98,804

2. What amount should be reported as gain on sale of trading securities in 2018?  A. B. C. D.

P2,550 P6,000 P8,550 P3,450

3. What amount of unrealized gain or loss should be reported in the income statement for the year ended December 31, 2018?  A. B. C. D.

P21,200 unrealized gain P21,200 unrealized loss P6,150 unrealized gain P6,150 unrealized loss

4. What is the carrying amount of the remaining trading securities on December 31, 2018?  A. B. C. D.

P1,481,000 P1,450,450 P1,473,450 P1,452,250

5. What is the loss on the sale of the remaining Turkey bonds on February 1, 2019?  A. B. C. D.

P4,500 P10,500 P13,500 P750

Page 11 PROBLEM NO. 7 – AUDIT OF INTANGIBLE ASSETS BANAWE COMPANY began operations on January 2, 2010. Shown below is the company’s trial balance prepared by its staff accountant for December 31, 2018. Banawe Company UNADJUSTED TRIAL BALANCE December 31, 2018 (in thousands of pesos) Cash  Accounts receivable Inventory Equipment  Accumulated depreciation – Equipment Buildings  Accumulated depreciation – Buildings Patents Franchise agreement Organization costs Goodwill  Accounts payable  Accrued wages payable  Accrued taxes payable Bonds payable Premium on bonds payable Preference shares (P100 par value) Ordinary shares (P25 par value) Premium on share capital Retained earnings (as of January 1) Sales Cost of goods sold Selling and administrative expenses

Debit P 60 150 360 2,400

Credit

P 750 3,600 1,200 1,650 285 306 1,035 36 15 180 1,500 105 300 3,300 660 1,200 2,700 1,200 900 P11,946

P11,946

 As a member of the audit team for Banawe Company, you have been assigned the audit of the company’s intangible assets. Your investigation reveals the following: Patents The patents, acquired January 2, 2011, are being amortized over an expected useful life of 14 years. Improvements made to equipment covered by the patents costing P225,000 were debited to the account in January 2015. Amortization in 2015-2017 included amortization on the P225,000 for the remaining life of the relevant patent. It is determined that the P225,000 should have been expensed in 2015. It is further determined on December 31, 2017, that one of the patents has a remaining life of only 2 years. This patent was originally assigned a cost of P630,000. Franchise Agreement  A franchise agreement was signed on January 1, 2018. A P150,000 fee was paid, covering a 5year period, at the end of which the company may renew the agreement by paying P150,000. A decision on renewal has not been made as of December 31, 2018. The agreement calls for an annual payment of 5% of revenue. An entry debiting the account for P135,000 was made at the time of the cash payment for 2018. Organization Costs Organization costs include the unamortized portion of amounts paid to promote for services rendered at the inception of the corporation. These fees have been amortized, since inception, over an estimated 40-year life. The decision is made, as of December 31, 2018, to reduce the total period of amortization of organization costs to 12 years.

Page 12

Goodwill The goodwill account includes the following: P135,000 -- Legal expenses relative to incorporation. These were assigned to the account in January 2010. P600,000 -- Excess of cost over assigned net asset values of an enterprise acquired in early 2016 expected to be of value for an indefinite period. P300,000 -- Paid to an advertising consulting firm in early 2017 for a major advertising effort expected to be beneficial for an indefinite period. No amortization has been taken on any amount in the Goodwill account.

1. What is the carrying value of the Patents on December 31, 2018?  A. B. C. D.

P1,211,786 P1,009,286 P1,166,786 P1,256,786

2. What is the carrying value of the Franchise Agreement on December 31, 2018?  A. B. C. D.

P120,000 P228,000 P123,000 P112,500

3. What is the carrying value of the Organization Costs on December 31, 2018?  A. B. C. D.

P171,000 P0 C.P417,375 P194,625

4. What is the carrying value of Goodwill on December 31, 2018?  A. B. C. D.

P1,035,000 P585,000 P1,009,125 P600,000

5. What is the total Patent amortization for 2018?  A. B. C. D.

P370,714 P168,214 P315,000 P325,714

Page 13 PROBLEM NO. 8 – COMPUTATION OF CASH SHORTAGE  You have been asked by the proprietor of the SANDOVAL CO. to verify the accountability of the cashier-bookkeeper, who was allowed to take a vacation leave a few days ago.  A. The bank reconciliation statements prepared by the cashier-bookkeeper are presented below: November 30, 2018

Balance per bank statement Cash on hand Total Outstanding checks: No. 2520 2521 2522 Erroneous bank charge Erroneous bank credit Book balance

P21,500 500 22,000 P 2,000 1,400 1,900

(3,300) 2,000 (500) P20,200

December 31, 2018

Balance per bank statement Cash on hand Total Outstanding checks: No. 2674 2675 2676 Erroneous bank charge Erroneous bank credit Book balance

P 135,000 6,300 141,300 P31,000 10,300 5,000

(41,300) 3,000 (600) P102,400

B. The Cash in Bank account in the general ledger shows the following debits and credits during December: Cash in Bank Dec. 1 Balance 2 Received from 7 Received from 12 Received from 17 Received from 23 Received from 27 Received from 31 Received from Total

P20,200 customers 4,500 customers 5,000 customers 20,000 customers 30,000 customers 9,000 customers 70,000 customers 48,500 P198,200

Dec. 1 Checks issued P2,000 5 Checks issued 5,200 14 Checks issued 31,000 24 Checks issued 46,000 28 Checks issued 7,600

31 Balance Total

102,400 P198,200

Page 14 C. The following summarized transactions were taken from the bank statement for the month of December 2018: Balance, December 1, 2018

P16,500

Total deposits The a. b. c.

total deposits per bank statement include: Collection of notes receivable Correction of November erroneous bank charge December 10 deposit of Lava, Inc. credited in error to SANDOVAL Total

P173,700 P5,000 2,000 600 P7,600

Total checks The total checks per bank statement include: a. Correction of November erroneous bank credit b. December check of Nile Co. charged in error to SANDOVAL Total

P65,200 P 500 3,000 P3,500

D. Cash on hand per count in the morning of January 2, 2019, amounted to P6,300. E. Before leaving his company for a one-week vacation, the proprietor had left several signed blank checks that the cashier-bookkeeper had cashed for his personal use.

1. What is the adjusted cash balance on November 30, 2018?  A. B. C. D.

P16,500 P13,200 P20,200 P14,500

2. The amount of unaccounted receipts in December is  A. B. C. D.

P11,000 P13,200 P9,000 P15,100

3. The amount of unrecorded/unsupported disbursements in December is  A. B. C. D.

P15,100 P10,900 P7,000 P5,000

4. What is the total cash shortage as of December 31, 2018?  A. B. C. D.

P26,000 P15,100 P33,000 P7,000

5. What is the adjusted cash balance on December 31, 2018?  A. B. C. D.

P102,400 P125,000 P87,400 P111,400

Page 15

PROBLEM NO. 9 – AUDIT OF INVENTORIES

The cost of goods sold section of the income statement prepared by your client for the year ende d December 31 appears as follows: Inventory, January 1 Purchases Cost of goods available for sale Inventory, December 31 Cost of goods sold

P 240,000 4,800,000 P5,040,000 300,000 P4,740,000

 Although the books have been closed, your working paper trial balance is prepared showing all accounts with activity during the year. This is the first time your firm has made an examination. The January 1 and December 31 inventories appearing above were determined by physical count of the goods on hand on those dates and no reconciling items were considered. All purchases are FOB shipping point. In the course of your examination of the inventory cutoff, both at the beginning and end of the year, you discovered the following facts:

Beginning of the Year 1. Invoices totaling P75,000 were entered in the voucher register in January, but the goods were received during December. 2. December invoices totaling P39,600 were entered in the voucher register in December, but the goods were not received until January.

End of the Year 3. Sales of P129,000 (cost of P38,700) were made on account on December 31 and the goods delivered at that time, but all entries relating to the sales were made on January 2. 4. Invoices totaling P45,000 were entered in the voucher register in January, but the goods were received in December. 5. December invoices totaling P54,000 were entered in the voucher register in December, but the goods were not received until January. 6. Invoices totaling P36,000 were entered in the voucher register in January, and the goods were received in January, but the invoices were dated December.

Page 16 1. What working paper adjustment should be made at the end of the current year for item no. 1?  A. Purchases 75,000 Retained earnings 75,000 B. Retained earnings 75,000 Purchases 75,000 C. Inventory, beginning 75,000 Purchases 75,000 D. No adjusting entry is necessary.

2. The working paper adjustment to correct the error described in item no. 3 should include a debit to  A. B. C. D.

Accounts receivable of P129,000 Sales of P129,000 Inventory of P38,700 Retained earnings of P90,300

3. The company’s statement of financial position as of the end of the current  year should show inventory of  A. B. C. D.

P390,000 P300,000 P279,600 P351,300

4. What is the net adjustment to purchases of the current year?  A. B. C. D.

P81,000 increase P75,000 decrease P6,000 increase P6,000 decrease

5. The cost of goods sold for the current year is  A. B. C. D.

P4,683,600 P4,659,600 P4,740,000 P4,695,600

Page 17 PROBLEM NO. 10 – AUDIT OF VARIOUS WORKING CAPITAL ACCOUNTS The following accounts were included in the unadjusted trial balance of BUNCHING COMPANY as of December 31, 2018: Cash ................................................................................... P 963,200  Accounts receivable ............................................................... 2,254,000 Inventory ............................................................................. 6,050,000  Accounts payable .................................................................. 4,201,000  Accrued expenses .................................................................... 431,000 During your audit, you noted that Bunching Company held its cash books open after year-end. In addition, your audit revealed the following: 1. Receipts for January 2019 of P654,600 were recorded in the December 2018 cash receipts book. The receipts of P360,100 represent cash sales and P294,500 represent collections from customers, net of 5% cash discounts. 2. Accounts payable of P372,400 was paid in January 2019. The payments, on which discounts of P12,400 were taken, were included in the December 2018 check register. 3. Merchandise inventory is valued at P6,050,000 prior to any adjustments. information has been found relating to certain inventory transactions:

The following

a. The invoice for goods costing P175,000 was received and recorded as a purchase on December 31, 2018. The related goods, shipped FOB destination, were received on January 4, 2019, and thus were not included in the physical inventory. b. A P182,000 shipment of goods to a customer on December 30, 2018, terms FOB destination, are not included in the year-end inventory. The goods cost P130,000 and were delivered to the customer on January 3, 2019. The sale was properly recorded in 2019. c. Goods costing P637,500 were shipped on December 31, 2018, and were delivered to the customer on January 3, 2019. The terms of the invoice were FOB shipping point. The goods were included in the 2018 ending inventory even though the sale was recorded in 2018. d. Goods costing P217,500 were received from a vendor on January 4, 2019. The related invoice was received and recorded on January 6, 2019. The goods were shipped on December 31, 2018, terms FOB shipping point. e. Goods valued at P275,000 are on consignment with a customer. These goods are not included in the inventory figure. f.

Goods valued at P612,800 are on consignment from a vendor. These goods are not included in the physical inventory.

Page 18 Based on the above and the result of your audit, determine the adjusted balances of the following as of December 31, 2018: 1. Cash  A. B. C. D.

P963,200 P681,000 P668,600 P693,400

2. Accounts receivable  A. B. C. D.

P2,908,600 P2,564,000 P2,254,000 P2,548,500

3. Inventory  A. B. C. D.

P6,035,000 P6,080,000 P5,860,000 P5,010,000

4. Accounts payable  A. B. C. D.

P4,790,900 P4,615,900 P4,573,000 P4,603,500

5. Current ratio  A. B. C. D.

2.00 1.83 1.84 2.01

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