CPAR SPECIAL NOTES Auditing Problem Test Bank 1 Solution .doc

SOLUTION - AUDITING PROBLEMS TEST BANK 1 PROBLEM 1 – TANYING CORP. 1. B Sales (P1,353,000 + P10,500 Freight) Sales returns and allowances Sales discounts !et sales

P1,363,500 (11,700) (2,60) P1,3",160

2. C #n$entor%, &an. 1 Purchases Purchase returns and allowances (P2,'00  6) Freight in (P16,575 + P1,710) *ost o goods a$ailale or sale

P26",100 P2,'00 (25,'') 1',2'5

3. D #n$entor%, -ec. 31, 2017 Per oos /oods out on consignent Per audit

17,5"7 P6'6,6"7

P 61,650 55,'00 P117,50

. C -istriution costs Sales salaries and coissions (P75,000 + P",1'0  3) P75,275  4d$ertising eense (P',270 + P5,5  26) 50,0'' -ereciation eense  Salesdeli$er% e8uient e8uient (P1',300 + P23,00  10  1012) 20,250 Freight eense 10,500 9ra$el eense  sales reresentati$es 13,6'0 :iscellaneous selling eenses ',220 9otal P17',013 5. B  4dinistrati$e eenses ;egal ser$ices #nsurance and licenses -ereciation eense  oice e8uient salaries -outul accounts eense (P7'3,000  2 ? P15,660  P'0) 9otal 6.  A  4llowance or doutul accounts (P7'3,000  2)

P 6,675 23,00 12,600 1",200 ,25 2,'65 10",'00 15,1'0 P1"3,7'5 P15,660

7. D !et sales *ost o goods sold (P6'6,6"7  P117,50) /ross incoe #nterest re$enue (P1,650 + P1,6'0) -i$idend re$enue /ain on sale o assets 9otal incoe

P1,3",160 (56",27) 77","13 3,330 15,50 23,60 P'22,153

'. C 9otal incoe -istriution costs  4dinistrati$e eenses

P'22,153 (17',013) (1"3,7'5) #nterest eense

(13,560) ;oss on sale o e8uient #ncoe ro continuing oerations eore ta ". B =ice sulies in$entor% 10.  A #ncoe eore ta #ncoe ta (P21',""5  30) #ncoe ro continuing oerations #ncoe ro discontinued oerations, net o ta (P120,000  70) !et incoe

(217,'00) P21',""5 P3,675 P21',""5 (65,66") 153,2"6 ',000 P237,2"6

Page 2 PROBLEM 2 – BUNCHING COMPANY 

Per oos  4&A 1 2 3 a  c d e Per audit

 AJES 1.

2.

*ash P"63,200 (65,600) 360,000 BBB BBB BBB BBB BBB P66',600

 4ccounts @ecei$ale P2,25,000 310,000 BBB BBB BBB BBB BBB BBB P2,56,000

(11  C)

(12  B)

Sales  4ccounts recei$ale (P2",500  "5) Sales discounts (P310,000  5) *ash *ash (P372,00  P12,00) Purchase discounts  4ccounts a%ale

3. a 4ccounts a%ale Purchases

#n$entor% P6,050,000 BBB BB B BBB 130,000 (637,500) 217,500 275,000 P6,035,000 (13  A)  A)

4ccounts Pa%ale P,201,000 BBB 372,00 (175,000) BBB BBB 217,500 BBB P,615,"00 (1  B)  B)

360,100 310,000 15,500 65,600 360,000 12,00 372,00 175,000 175,000

 #n$entor% *ost o sales

130,000

c *ost o sales #n$entor%

637,500

d Purchases  4ccounts a%ale #n$entor% *ost o sales

217,500

e #n$entor% *ost o sales

130,000 637,500 217,500 217,500 217,500 275,000 275,000

 !o adCu adCust stin ing g ent entr% r% 15. C *urrent ratio *urrent assets *ash  4ccounts recei$ale #n$entor% *urrent liailities  4ccounts a%ale  4ccrued eenses

P 66',600 2,56,000 6,035,000 P,615,"00 31,000

P",267,600

5,06,"00 1.'

Page 3 PROBLEM 3 – PAKO COMPANY  16. D Dalance, &an. 1 &une 30 ac8uisition (P1,0'0,000 + P',000) Set. 30 sale -ec. 1 trade in old achine new achine Dalance, -ec. 31

P1,'00,000 1,12',000 (150,000) ("0,000) 270,000 P2,"5',000

17.  A @eainder o eginning alance (P1,'00,000  P150,000  P"0 ,000 ? P1,560,000  10) &une 30 ac8uisition (P1,12',000  10  612) Set. 30 sale (P150,000  10  "12) -ec. 1 trade in old achine (P"0,000  10  1112) new achine (P270,000  10  112) -ereciation eense or 2015

P156,000 56,00 11,250 ',250 2,250 P23,150

GENLUNA COPPERMINES, INC. 1'. C -eletion rate er ton (P1,5'0,000  1,620,000) *oer ore ined in 2017 (15,000  6 onths) -eletion or 2017 -eletion er oos =$erstateent o deletion eense

P"  "0,000 P '10,000 1,215,000 P05,000

1". D -ereciale cost o achiner% (P1,'00,000  "0) Astiated coer ore reser$e -ereciation rate er ton *oer ore ined in 2017 -ereciation eense or 2017 -ereciation er oos =$erstateent o dereciation eense

P1,620,000 1,620,000 P1 "0,000 P "0,000 120,000 P 30,000

20. D &anuar% 1, 201 9otal cost o achine (P300,000 + P3,000 + P12,000) @esidual $alue -ereciale cost Astiated useul lie  4nnual dereciation

P315,000 (12,000) P303,000 10 %ears P30,300

-ereciale cost -ereciation, 2016  201 (P30,300  3 %ears) @eaining dereciale cost, &an. 1, 2017 *ost o new arts 9otal @eaining useul lie (10 %ears  3 %ears) @e$ised annual dereciation

P303,000 ("0,000) P212,100 37,'00 P2","00 7 %ears P35,700

PROBLEM 4 – HARLINGTON COMPANY  21.  A !et incoe eore trading securit% adCustent