Pre Week 2017

BALIWAG POLYTECHNIC COLLEGE PRE WEEK MATERIALS FOR AUDITING PROBLEMS  J. VILLENA, CPA CPA PROBLEM 1 RESA Anna Corp. uses the direct direct method to prepare prepare its statement statement of cash flows. flows. Anna Corp.’s Corp.’s trial balances at December 31, 2014 and 2013 are as follows: Debits Cash  Accounts #ecei$able #ecei$able %n$entor& !ropert&, plant and e(uipment *namorti+ed bond discount Cost of oods sold ellin e/pense eneral and Administrati$e e/penses %nterest e/pense %ncome ta/ e/pense

Credits  Allowance for uncollectible uncollectible accounts  Accumulated Depreciation Depreciation rade account pa&able %ncome ta/es pa&able Deferred ta/ liabilit& - callable bonds pa&able hare capital hare premium #etained arnins ales

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123114 ! 3",000 ! 33,000 ! 31,000 ! 100,000 ! 4,"00 ! 2"0,000 ! 141,"00 ! 13',000 ! 4,300 ! 20,400 ! '",'00

123113 ! 32,000 ! 30,000 ! 4',000

123114 !1,300 ! 1,"00 ! 2",000 ! 21,000 ! ",300 ! 4",000 ! "0,000 ! ),100 ! 44,'00 ! "3-,-00 ! '",'00

123113

! )",000 ! ",000 ! 3-0,000 ! 1'2,000 ! 1"1,300 ! 2,00 ! 1,200 ! )',100

! 1,100 ! 1",000 ! 1',"00 ! 2',100 ! 4,00 ! 20,000 ! 40,000 ! ',"00 ! 4,00 ! ''-,'00 ! )',100

5ord purchased ! ",000 in e(uipment durin 2014. 5ord allocated one6third of its depreciation e/penses to sellin e/penses and the remainder to eneral and administrati$e e/penses.

7*%89: 1. Cash collected from customers 2. Cash paid for oods to be sold 3. Cash paid for interest 4. Cash paid for income ta/es ". Cash paid for sellin e/penses PROBLEM 2 RESA %n connection with &our audit of the financial statements of A;D*< C8=!A9> C8=!A9> for the &ear ended December 31, 201, &ou athered the followin information. 1.

he compan& compan& maintains maintains its its current current account account with s sunami statement of financial position at December 31, 201 is understatedo$erstated b&

C89D%%89A;, %9C. has used the accrual basis of accountin for se$eral &ears. A re$iew of the records, howe$er, indicates that some e/penses and re$enues ha$e been handled on a cash basis because of errors made b& an ine/perienced boo??eeper. %ncome statements prepared b& the boo??eeper reported ! "30,000 net income for 201" and ! ))),000 net income for 201. 5urther e/amination of the records re$eals that the followin items were handled improperl&. •

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%n$oices for office supplies purchased ha$e been chared to e/pense accounts when recei$ed. %n$entories of supplies on hand at the end of each &ear ha$e been inored, and no entr& has been made for them December 31, 2014 ! 3),000 December 31, 201" ! 2-,200 December 31, 201 ! 42,00 aes !a&able on December 31 has been consistentl& omitted from the records of that date and has been entered as e/penses when paid in the followin &ear. he amounts of accruals recorded in this manner were: December 31, 2014 ! 33,000 December 31, 201" ! 3,000 December 31, 201 ! 2-,200 #ent was recei$ed from a tenant in December 201". he amount ! 120,000, was recorded as income at that time e$en thouh the rental pertained to 201.

QUESTIOS! 1. 2.

hat is the corrected net income for the &ear 201" hat is the corrected net income for the &ear 201

PROBLEM 13 A portion of !AD C8=!A9>’s statement of financial position appears as follows. December 31, 201"

December 31, 201

 Assets: Cash 9otes #ecei$able %n$entor& ;iabilities:  Accounts pa&able

! 100,000 2",000 1)),-'" '",000

! 3"3,300 0  

!assed Compan& pa&s for all operatin e/penses with cash and purchases all in$entor& on credit. Durin 201, cash totalin ! 4'1,'00 was paid on accounts pa&able. 8peratin e/penses for 201 totaled ! 220,000. All sales are cash. he in$entor& was restoc?ed b& purchasin 1,"00 units per month and $alued usin periodic 5%58. he unit cost of in$entor& was ! 32.0 durin 1st month and increased b& ! 0.10 monthl& durin the &ear. !assed sells onl& one product. All sales are made for ! "0 per unit. he endin in$entor& for 201" was $alued at ! 32."0 per unit. 8* RESPECT" ALAS BE HUMBLE"