FINAL PREBOARD OCTOBER 2016 CPAR - AUDITING PROBLEMS

FINAL PREBOARD OCTOBER 2016 CPAR - AUDITING PROBLEMS

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You have been engaged to audit MASINAG COMPANY, a trading company, for the year ended

December 31, 2016. The company’s unadjusted trial balance as of December 31, 2016 is

presented below:

During the course of your audit, you obtained additional information relative to the accounts in

the trial balance, as follows:

CASH

1. Your audit of Cash disclosed that on December 29, 2016, Masinag recorded and wrote check

payments to merchandise suppliers amounting to P150,000. Several checks amounting to

P60,000 were issued on January 4, 2017.

2. On December 29, 2016, a customer’s check for P3,000 was returned by the bank and marked

“DAUD” (drawn against uncleared deposit). Corresponding entry was made by the client on

January 2, 2017.

3. Verification of the other reconciling items in the bank reconciliation statement as of December

31, 2016, revealed the following:

c) A bank debit memo dated December 15, 2016, for P123,750 representing payment of a

six-month loan inclusive of interest of P3,750.

d) Several bank deposits directly made by the customer in December 2016 totaling P22,500.

e) Interest income on various savings account deposits, P4,800.

f) Undeposited collections from customers P10,500 received by the bank on January 2, 2017.

4. Included in the cash account is petty cash fund of P3,000. Among the fund items found

during January 2, 2017 count were:

Currency and coins ................................................................................P 900

IOUs of employees dated December 29, 2016 ..............................................600

Unreplenished vouchers for expense dated December 29, 2016.......................600

Personal checks of the petty cash custodian dated January 5, 2017 ............ 900

Total..................................................................................................P3,000

FINANCIAL ASSETS HELD FOR TRADING

5. Analysis of the trading securities revealed the recording of the following transactions:

2016 Debit Credit

Jan. 15 Purchased 20,000 shares of Perlas Company P150,000

July 15 Received cash dividend P 12,000

Sept. 30 Received 2,000 share dividend, market value per

Share was P8.10 (Note 1) 16,200

Nov. 30 Sold 4,000 shares for P9 per share 39,600

166,200 51,600

Dec. 31 Balance 114,600

P166,200 P166,200

Note 1 Dividend income was credited for the same amount

Note 2 Market value per share of Perlas Company at December 31, 2016, was P9.30

ACCOUNTS RECEIVABLE

6. Analysis of accounting records revealed that all receivables are being recorded in a single

account—Accounts Receivable. The entries to this account are summarized below:

Debits

Jan. 1 Balance after deducting credit balance of P6,000..........................P 159,000

Charge sales.....................................................................................1,951,770

Charge for goods out on consignment (Note 1).........................................225,000

Refund to customers for January 1 credit balance.........................................6,000

Claim against common carrier for shipping damages ....................................9,000

IOUs from employees ..............................................................................1,500

Advances to suppliers ...................................................................... 15,000

Total .............................................................................................P2,367,270

Credits

CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) – MANILA FINAL PREBOARD EXAMINATION

AUDITING PROBLEMS SEPTEMBER 10,2016 / SATURDAY / 9:30AM – 12:30PM

Collections from customers, including overpayment of P15,000 .............P1,950,000

Write offs ...............................................................................................9,000

Merchandise returns and allowances.........................................................16,770