Ap-500Q: Quizzer On Purchasing/Disbursement Production and Revenue/Receipt Cycles: Audit of Inventories, Receivables and Cash and Cash Equivalents

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 41 May 2021 CPA Licensure Examination Quizzer
AUDITING (Auditing Problems) S. Ireneo C. Espenilla
AP-500Q: QUIZZER ON PURCHASING/DISBURSEMENT;

PRODUCTION AND REVENUE/RECEIPT CYCLES:
AUDIT OF INVENTORIES, RECEIVABLES AND CASH AND CASH EQUIVALENTS
PROBLEM 1:
Presented below is a list of items that may or may not be reported as inventory in a company’s
December 31, balance sheet:
Cost of goods out on consignment at another company’s store P2,400,000

Goods sold on installment basis 300,000
Goods in transit purchased FOB shipping point 360,000
Goods in transit purchased FOB destination 600,000
Cost of goods sold to another company, for which the company has signed an
agreement to repurchase at a set price that covers all costs related to the
inventory 900,000
Cost of goods sold where large returns are predictable 840,000
Cost of goods in transit sold FOB shipping point 360,000
Freight charges on goods purchased 240,000
Factory labor costs incurred on goods still unsold 150,000
Interest cost incurred for inventories that are routinely manufactured 120,000
Costs incurred to advertise goods held for resale 60,000
Materials on hand not yet placed into production 1,050,000
Office supplies 30,000
Raw materials on which the company has started production, but which are
not completely processed 840,000
Factory supplies 60,000
Cost of goods held on consignment from another company 1,350,000
Costs identified with units completed but not yet sold 780,000
Cost of goods in transit sold FOB destination 120,000
Temp. investment in stocks and bonds that will be resold in the near future 1,500,000
How much of these items would typically be reported as inventory in the financial statements?
a. 6,900,000 b. 6,000,000 c. 6,780,000 d. 6,660,000
PROBLEM 2:
The following accounts were extracted from the unadjusted trial balance of Silang Corp. as of
December 31, 2020:
Cash 963,200
Accounts receivables 2,254,000
Merchandise inventory 6,050,000
Accounts payable 4,201,000
Accrued expenses 60,400
During your audit, you discovered that the client held its cash records open even after year end.
Audit notes:
a. Collections for January 2021 of P654,600 were recorded in the December 2020 cash
records. The receipts of P360,100 represents cash sales with the balance representing
collections from customers who paid within the 5% cash discount period.
b. Accounts payable of P372,400 was paid in January 2021. The payments on which a
P12,400 cash discount has been taken were included in the December 31, 2020 check
register.
c. Merchandise inventory as stated in the trial balance represented the result of the count
conducted on December 30, 2020 on inventories on hand. The following information were
found to be relevant in your audit of inventories:
• Goods valued at P275,000 are on consignment with a customer and were not
included in the physical count
• Goods costing P217,500 were received from a vendor on January 4, 2021. The
related invoice was received and recorded on January 6, 2021. These goods were
shipped by the vendor on December 31, 2020 under an FOB shipping point terms.
Page 1 of 27 0915-2303213 www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP-500Q
Quizzer: PURCHASING/DIBURSEMENT, PRODUCTION AND REVENEU/RECEIPT CYCLES:
• Goods costing P637,500 were shipped on December 31, 2020, and were received
by the customer on January 2, 2021. The terms of the invoice were FOB shipping
point. The sales of P815,000 has been recorded in 2020.
• A shipment of goods invoiced at P182,000 to a customer on December 29, terms

FOB destination was recorded in 2021. The cost of the related goods amounted to
P130,000 and were received by the customer on January 4, 2021.
• The invoice for goods costing P175,000 was received and recorded as purchase on
December 31, 2020. The related goods, shipped FOB Destination were received
on January 4, 2021.
• Goods valued at P612,800 are on consignment from a vendor. These goods were
excluded from the physical count.
Requirements: Based on the result of your audit ascertain the following:

1. Adjusted balance of Cash:
a. 963,200 c. 681,000
b. 693,400 d. 668,600
2. Adjusted balance of Accounts receivable:
a. 2,254,000 c. 2,564,000
b. 2,548,500 d. 2,908,600
3. Correct Inventory ending balance:
a. 5,010,000 c. 6,035,000
b. 5,860,000 d. 6,080,000
4. Adjusted accounts payable:
a. 4,243,500 c. 4,615,900
b. 4,398,400 d. 4,790,900
5. Net adjustment to cost of sales:
a. debit by P57,500 c. credit by P580,000
b. debit by P232,500 d. credit by P555,300
6. Correct working capital ratio:
a. 2.20 c. 1.85
b. 1.98 d. 1.80
PROBLEM 3:
In your audit of the December 31, 2020 financial statements of Ivy Inc., you found the following
inventory related transactions:
a. Goods costing P100,000 are on consignment with a customer. These goods were invoiced
at normal profit margin which was at 40% based on cost and was recorded as 2020
sales. Being offsite on the count date which was on December 30, 2020, the goods
were not included in the physical count.
b. Goods costing P33,000 were delivered to Ivy Inc. on January 4, 2021. The invoice of
these goods were received and recorded on January 10, 2021. The invoice showed the
shipment was made on December 29, 2020, FOB shipping point.
c. Goods costing P40,000 were shipped FOB shipping point on December 31, 2020, and
were received by the customer on January 2, 2021. Although sale was recorded in
2020, these goods were included in the 2020 inventory.
d. Goods costing P16,000 were shipped to a customer on December 30, 2020, FOB
destination. These goods were received by the customer on January 5, 2021 and were
not included in the physical count. The sale was properly recorded in 2021.
e. Goods costing P22,000 shipped by a vendor under FOB destination term, were received
on January 3, 2021. The related invoice however, were received on December 31, 2020,
thus was recorded as purchase in 2020.
f. Goods costing P50,000 were received from a vendor under consignment term. These
goods were included in the physical count. No purchase related to the inventory had
been recorded yet.
Page 2 of 27
g. Ivy Inc., recorded as 2020 sale a P112,000 invoice for goods delivered to a customer on
December 31, 2020, FOB Destination. The goods were received by the customer on
January 5, 2021. Having been delivered after the count date, the goods were included in
the physical count.
Requirements:
1. What is the net adjustment to inventories as of December 31, 2020?
a. 59,000 c. 50,000
b. 43,000 d. 66,000
2. Assuming all sales are on account, what is the net adjustment to accounts receivable as of
December 31, 2020?
a. 260,000 c. 140,000
b. 252,000 d. 212,000
3. Assuming all purchases are on account, what is the net adjustment to accounts payable?
a. 22,000 c. 11,000
b. 33,000 d. 55,000
4. What is the effect of the errors to the 2020 net income?
a. 194,000 c. 164,000
b. 220,000 d. 204,000
PROBLEM 4:
Bird Company is a manufacturer of small tools. The following information was obtained from the
company’s accounting records for the year ended December 31, 2020:
Inventory at December 31, 2020 (based on physical count in Bird’s

warehouse at cost on December 31, 2020) P1,870,000
Accounts payable at December 31, 2020 1,415,000
Net sales (sales less sales returns) 9,693,400
Your audit reveals the following information:

a. The physical count included tools to be shipped to a customer FOB shipping point on
December 31, 2020. These tools cost P64,000 and were billed at P78,500 and were
recorded as December sales. They were physically segregated awaiting shipping
instructions from the customer.
b. Goods shipped FOB shipping point by a vendor were in transit on December 31, 2020.
These invoice amounting to P93,000 were received in January 2021 and were recorded as
purchases upon receipt.
c. Work in process inventory costing P27,000 was sent to a job contractor for further
processing.
d. Not included in the physical count were goods returned by customers on December 31,
2020. These goods costing P49,000 were inspected and returned to inventory on January
7, 2021. Credit memos for P67,800 were issued to the customers at that date.
e. In transit to a customer on December 31, 2020, were goods costing P17,000 shipped FOB
destination on December 26, 2020. A sales invoice for P29,400 was issued on January 3,
2021, when Bird Company was notified by a customer that the tools had been received.
f. At exactly 5:00 pm on December 31, 2020, goods costing P31,200 were received from a
vendor. These were recorded on a receiving report dated January 2, 2021. The related
invoice was recorded on December 31, 2020, but the goods were not included in the
physical count.
g. Included in the physical count were goods received from a vendor on December 27, 2020.
However, the related invoice for P36,000 was not recorded because the accounting
department’s copy of the receiving report was lost.
h. A monthly freight bill for P16,000 was received on January 3, 2021. It specifically related
to merchandise bought in December 31, 2020, one-half of which was still in the inventory
at December 31, 2020. The freight was not included in either the inventory or in
accounts payable at December 31, 2020.
Page 3 of 27
Based on the preceding information, compute the December 31, 2020, adjusted balance of the
following:
A B C D
1. Inventory 2,095,200 2,031,200 2,046,200 2,078,200
2. Accounts payable 1,552,000 1,560,000 1,467,000 1,591,200
3. Net sales 9,614,900 9,576,500 9,625,600 9,547,100
PROBLEM 5:
You are making an audit of the Malaguku Co. for the year ended December 31, 2020. You have
observed the taking of physical inventory and have noted that all merchandise actually
received up to the close of business, December 28, 2020, were included on the inventory
sheets. The total of the physical inventory, at invoice cost, is P175,000, while the purchase
account shows a balance of P1,750,000 as of December 31, 2020.
You noted also the following purchases invoices have been recorded in the voucher register as
follows:
DECEMBER
RR. 2020 VOUCHER INVOICE DATE TERMS MERCHANDISE
No. REGISTER RECEIVED
631 P 2,000 December 26 Shipping point December 29
632 4,000 December 26 Destination January 5
633 9,000 January 2 Destination December 30
634 8,000 December 31 Shipping point January 4
635 1,000 January 7 Shipping point December 28
636 6,000 January 3 Shipping point January 6
JANUARY
RR. 2021 VOUCEHR INVOICE DATE TERMS MERCHANDISE
No. REGISTER RECEIVED
637 P 8,500 December 20 Destination January 8
638 7,200 January 2 Shipping point December 27
641 4,100 January 2 Destination December 25
Requirements:
1. What is the adjusted balance of Purchases for the period ended December 31, 2020?
a. 1,751,300 c. 1,753,200
b. 1,743,800 d. 1,751,200
2. What is the adjusted balance of the Inventory account as of December 31, 2020?
a. 175,000 c. 194,000
b. 186,000 d. 198,100
PROBLEM 6:
You are engaged in the audit of the inventory of the Kula Inc. as of December 31, 2020. The
company is on physical inventory basis. The physical inventory was actually taken on December
29, 2020 rather than the evening of December 31, so that the company employees might enjoy
the New Year’s festivities. You have observed the taking of the physical inventory. As taken, the
physical inventory included only merchandise received through December 29. The subsequent
compilation of the inventory includes only the merchandise physically counted and is not yet
recorded on the books. After having completed appropriate work on the inventory as compiled,
you make additional tests to determine:
a. The correct cut off the purchases account for the year 2020. (it is the company policy
to recognize purchases based on freight terms and the passage of title). The ledger
balance is P650,000.
b. The correct amount of the inventory to be stated on a comparable basis with
acquisition costs (purchases) and sales. The inventory summary shows a total of
P27,000.
Listed in the table below are certain matters developed in the course of your tests.
Certain voucher register entries are as follows:
Page 4 of 27
Dates Mdse.
F.O.B. Terms Shipped Received Invoice No. Amount
December, 2020
Destination 12-23-20 12-26-20 1401 P 250
Shipping point 12-24-20 12-30-20 9176 310
Shipping point 12-24-20 12-31-20 0010 180
Destination 12-24-20 12-29-20 1307 550
Shipping point 12-26-20 1-2-21 6609 690
Destination 12-26-20 12-31-20 6610 420
Destination 12-26-20 1-3-21 0481 750
Shipping point 12-27-20 12-30-20 3671 290
Shipping point 1-2-21 1-4-21 6098 350
January, 2021
Destination 12-26-20 1-2-21 7611 680
Shipping point 12-27-20 12-30-20 7711 460
Destination 12-27-20 12-29-20 9001 770
Destination 12-28-20 1-2-21 8345 205
Shipping point 12-28-20 1-3-21 4678 315
Shipping point 12-29-20 12-31-20 9981 595
Destination 12-29-20 12-31-20 7263 610
Destination 12-31-20 1-4-21 4915 375
Shipping point 1-2-21 1-5-21 5666 805
The physical inventory compilation includes P750 of merchandise received on

consignment from a supplier.
The company has other consigned stocks on hand which were not included in the physical
inventory compilation and which cost P5,200 if purchased.
Shipments of December 31, 2020 were properly recorded on the books as sales. You
computed the cost of these sales as being P 1,900.
Requirements: Adjusted balances at December 31, 2020 of:

1. Inventory
a. 30,120 c. 27,300
b. 28,220 d. 26,430
2. Purchases
a. 649,675 c. 650,585
b. 649,990 d. 651,650
PROBLEM 7:
Flores Company cans two food commodities which it stores at various warehouses. The company
uses a perpetual inventory system under which the finished goods inventory is charged with
production and credited for sales at standard cost. The detail of the finished goods inventory is
maintained on punched cards by the tabulating department in units and pesos for the various
warehouses.
The accounting department receives copies of daily production reports and sales invoices. Units
are then extended at standard cost and a summary of the day’s activity is posted to the Finished
Goods Inventory general ledger control account. Next the sales invoices and production reports
are sent to the tabulating department for processing. Every month the control account and
detailed tab records are reconciled and adjustments recorded.
The last reconciliation and adjustments were made at November 30, 2020.
Your CPA firm observed the taking of the physical inventory at all locations in December 31,
2020. The inventory count began at 4:00 p.m. and was completed at 8:00 p.m. The company’s
figure for the physical inventory is P342,400. The general ledger control account balance at
December 31 was P384,900, and the final “tab run” of the inventory punched cards showed a
total of P403,300.
Unit cost data for the company’s two products are as follows:
Product Standard Cost
A P2
B 3
Page 5 of 27
A review of December transactions disclosed the following:

1. Sales invoice no. 1310, December 2, was priced at standard cost for P11,700 but was
listed on the accounting department’s daily summary at P11,200.
2. A production report for P23,900, December 15, was processed twice in error by the
tabulating department.
3. Sales invoice no. 1423, December 9, for 1,200 units of product A, was priced at a
standard cost of P1.50 per unit by the accounting department. The tabulating department
corrected the error but did not notify the accounting department of the error.
4. A shipment of 3,400 units of Product A was invoiced by the billing department as 3,000
units on sales invoice no. 1504, December 27. the error was discovered by your review of
transactions.
5. On December 27 the Pampanga warehouse notified the tabulating department to remove

2,200 unsalable units of Product A from the finished goods inventory, which it did without
receiving a special invoice from the accounting department. The accounting department
received a copy of the Pampanga warehouse notification on December 29 and prepared a
special invoice which was processed in the normal manner. The units were not included in
the physical inventory.
6. A report for the production on January 3 of P2,500 units of Product B was processed for
the Bulacan plant as of December 31.
7. A shipment of 300 units of Product B was made from Tarlac warehouse to Ken’s Markets,
Inc., at 8:30 p.m. on December 31 as an emergency service. The sales invoice was
processed as of December 31. Flores Company prefers to treat the transaction as a sale in
2020.
8. The working papers of the auditor observing the physical count at the Bataan warehouse
revealed that 700 units of Product B were omitted from Flores’s physical count. Flores
concurred that the units were omitted in error.
9. A sales invoice for 600 units of Product A shipped from the Zambales warehouse was
mislaid and was not processed until January 5. The units were shipped on December 30.
10. The physical inventory of the Angeles warehouse excluded 350 units of Product A marked
“reserved”. Investigation revealed that this merchandise was being stored as a
convenience for Steve’s Markets, Inc., a customer. This merchandise, which has not been
recorded as a sale, is billed as it is shipped.
11. A shipment of 10,000 units of Product B was made on December 27 from the Zambales
warehouse to the Bataan warehouse. The shipment arrived on January 6 but had been
excluded from the physical inventories.
Requirements:
1. What is the correct inventory balance to be presented in the balance sheet as of December
31, 2020?
a. 344,300 c. 383,000
b. 375,500 d. 374,300
2. What is the inventory shortage/overage?
a. 7,500 over c. 1,500 over
b. 7,500 shortage d. 0
PROBLEM 8:
On May 31, 2020, a fire completely destroyed the work-in process inventory of Alder Paints.
Physical inventory figures were published as follows:
As of January 1, 2020 As of May 31, 2020

Raw Materials P 15,000 P 30,000
Work-in Process 50,000 --
Finished Goods 70,000 60,000
Page 6 of 27
Sales for the first five months of 2020 were P150,000. Raw materials purchased were P50,000.
Freight on purchases was P5,000. Direct labor for the five months was P40,000. To determine the
value of the lost inventory, the insurance adjusters have agreed to use an average gross profit
rate of 32.5%. Assume that manufacturing overhead was 45% of direct labor cost.
Requirements:
1. The value of the goods manufactured and completed as of May 31, 2020 was
a. P60,000 c. P95,000
b. P90,000 d. 91,250
2. Raw materials used during the first five months of 2020 were
a. P25,000 c. P40,000
b. P35,000 d. P45,000
3. The total value of goods put in process during the five-month period amounted to
a. P143,000 c. P168,000
b. P150,000 d. P148,000
4. The value of the destroyed work-in process inventory as determined by the insurance
adjusters would be
a. P56,750 c. P86,750
b. P65,750 d. P57,650
PROBLEM 9:
On May 21, 2020, a fire destroyed the entire merchandise inventory on hand of Natural
Corporation. The following information is available:
Sales, January 1 through May 2, 2020 P380,000

Sales return (covering the same period) 20,000
Sales allowance (covering the same period) 10,000
Sales discounts (covering the same period) 25,000
Inventory, January 1, 2020 80,000
Purchases, January 1 through May 2, 2020 (including P40,000 of
goods in transit on May 2, 2020 shipped FOB shipping point) 400,000
Purchase discounts 40,000
Purchase returns and allowances 30,000
Mark-up percentage on cost 20%
1. What is the estimated inventory on May 2, 2020 immediately prior to the fire?
a. 70,000. c. 110,000.
b. 82,000. d. 122,000.
2. How much should be recognized as inventory loss?
a. 30,000. c. 70,000.
b. 42,000. d. 82,000.
PROBLEM 10:
You were assigned to test the reasonableness of the inventory account balance as reported by
your client, Surety Corp. The following information is made available by Surety Corp.’s
accountant:
Cost Retail
Beginning inventory P598,400 P1,500,000
Purchases 3,048,400 5,500,000
Freight in 80,000
Purchase returns 140,000 180,000
Mark-ups 600,000
Mark-up cancellations 100,000
Mark-downs 1,300,000
Mark-down cancellations 385,000
Sales 4,470,000
Sales returns 150,000
Sales discount 200,000
Employee discount 400,000
Ending inventory as a result of the physical count conducted on December 31, was at P649,600.
What is the amount of estimated inventory shortage, if any, as a result of your test of
reasonableness under the following assumed cost formula? (round-off cost percentage to 2 whole
numbers)
Page 7 of 27
1. Lower of cost or average/Conservative/Conventional Approach

a. none b. 176,050 c. 327,700 d. 479,350
2. Average Approach
a. none b. 176,050 c. 294,000 d. 327,700
3. FIFO Retail Approach

a. 176,050 b. 294,000 c. 378,250 d. 479,350
PROBLEM 11:
Nancy Inc. had the following items of merchandise inventories with related information about
estimated selling price and cost to sell as of December 31, 2020:
Class Z:
Item Quantity Unit Cost Unit Selling Price Unit Cost to Sell
Z-01 10,000 P20 P30 P5
Z-02 15,000 25 30 8
Z-03 20,000 30 40 14
Z-04 25,000 32 45 10
Z-05 30,000 35 50 20
Class Y:
Item Quantity Unit Cost Unit Selling Price Unit Cost to Sell
Y-01 20,000 P22 P25 P2
Y-02 22,000 28 30 5
Y-03 28,000 25 40 10
Y-04 25,000 30 35 10
Y-05 30,000 15 30 5
Required:
1. What is the correct carrying value of inventories if the lower of cost or NRV valuation is
employed on an item per item basis?
a. 5,515,000 b. 5,831,000 c. 5,981,000 d. 6,100,000
2. What is the loss on inventory write-down, assuming that direct write-off method is used
under requirement 1?
a. none b. 119,000 c. 150,000 d. 466,000
3. What is the correct carrying value of inventories if the lower of cost or NRV valuation is
employed on a per class basis?
a. 5,515,000 b. 5,831,000 c. 5,981,000 d. 6,100,000
4. What is the loss on inventory write-down, assuming that direct write-off method is used
under requirement 3?
a. none b. 119,000 c. 150,000 d. 466,000
PROBLEM 12:
The Savior Corporation uses the lower of cost or net realizable value inventory. Data regarding
the items in work-in-process inventory are presented below:
Markers Pens Pencils
Historical cost P24,000 P18,880 P30,000
Selling price 36,000 21,800 38,000
Estimated cost to complete 3,000 2,620 6,200
Replacement cost 20,800 16,800 16,800
Normal profit margin as a % of selling 20% 20% 20%
price
Cost to sell based on selling price 5% 10% 10%
Required:
1. What is the loss on write-down under the direct write-off method?
a. none b. 3,880 c. 3,320 d. 5,620
Page 8 of 27
2. What is the loss on write-down under the allowance method, assuming that the unadjusted
balance of the allowance for inventory write-down is at P2,000?
a. none b. 1,880 c. 1,320 d. 3,620
3. What is the gain on recovery of previous write-down under the allowance method,
assuming that the unadjusted balance of the allowance for inventory write-down is at
P5,000?
a. none b. 1,120 c. 3,680 d. 1,380
4. What is the correct carrying value of inventories as of December 31?

a. 72,880 b. 76,200 c. 69,000 d. 67,200
PROBLEM 13:
You observed the inventory count of the Solsons Company as of December 31, 2020. The client
prepared the summary presented below and gave it to you for verification.
Quantity Cost NRV Amount

A 360 units P3.60/dozen P3.64/dozen P1,310.40
B 24 units 4.70 each 4.80 each 112.80
C 28 units 16.50 each 16.50 each 1,353.00
D 43 units 5.15 each 5.20 each 176.80
E 400 units 9.10 each 8.10 each 3,640.00
F 70 dozens 2.00 each 2.00 each 140.00
G 95 grosses 144.00 per gross 132.00 per gross 13,780.00
How much should the inventory be presented in the 2020 balance sheet?
a. 18,364.25. c. 20,513.20.
b. 19,604.25. d. 20,315.00.
PROBLEM 14:
Gloria Corporation uses the lower of cost or net realizable value inventory. Data regarding the
company’s inventories are as follows:
The general ledgers showed the following balances:

Cost: Finished goods P1,520,000
Work-in-process 748,000
Raw materials 2,875,000
Allowance: Finished goods (10,000)
Raw materials (40,000)
The following information were further furnished to you by the client:
Finished Goods Item M Item P Item Q

Cost P550,000 P540,000 P430,000
Selling price 675,000 620,000 820,000
Estimated cost to sell, as % of sales 20% 15% 15%
Work-in-process
Cost P240,000 P188,000 P320,000
Selling price 360,000 289,000 735,000
Estimated cost to complete 48,000 97,650 74,000
Replacement cost 208,000 168,000 375,000
Normal profit margin as % of selling price 25% 35% 40%
Raw Materials – Item M A B C

Cost P250,000 P500,000 P400,000
Current purchase price 250,000 480,000 375,000
Raw Materials – Item P X Y Z

Cost P400,000 P300,000 P200,000
Current purchase price 450,000 275,000 180,000
Raw Materials – Item Q D E

Cost P375,000 P450,000
Current purchase price 395,000 420,000
Page 9 of 27
Required:
1. What is the correct Finished Goods Inventory to be reported at the balance sheet?
a. 1,520,000 b. 1,497,000 c. 1,507,000 d. 1,510,000
2. What is the correct Work-in-process Inventory to be reported at the balance sheet date?
a. 708,000 b. 728,000 c. 748,000 d. 759,000
3. What is the correct total Raw Materials Inventory, to be reported at the balance sheet date?
a. 2,830,000 b. 2,755,000 c. 2,785,000 d. 2,830,000
4. What is the total loss on inventory write-down to be reported for the period?
a. 153,000 b. 90,000 c. 63,000 d. 103,000
5. Assuming direct write-off method was used in recognizing inventory write-down, how much is
the total loss on write-down for the year?
a. 153,000 b. 90,000 c. 63,000 d. 103,000
PROBLEM 15:
In the course of your audit of DKNY Company’s “Receivables” account as of December 31, 2020,
you found out that the account comprised the following items:
Trade accounts receivable P1,550,000

Trade accounts receivable, assigned (proceeds from assignment
amounted to P650,000) 750,000
Trade accounts receivable, factored (proceeds from factoring done on
a without-recourse basis amounted to P250,000 300,000
12% Trade notes receivable 200,000
20% Trade notes receivable, discounted at 40% upon receipt
of the 180-day note on a without recourse basis 300,000
Trade receivables rendered worthless 50,000
Installments receivable, normally due 1 year to two years 600,000
Customers’ accounts reporting credit balances
arising from sales returns 60,000
Advance payments for purchase of merchandise 300,000
Customers’ accounts reporting credit balances arising
from advance payments 40,000
Cash advances to subsidiary 800,000
Claim from insurance company 30,000
Subscription receivable due in 60 days, 600,000
Accrued interest receivable 20,000
Deposit on contract bids 500,000
Advances to stockholders (collectible in 2023) 2,000,000
Requirements:
1. How much is the total trade receivables?
a. 3,650,000 c. 3,000,000
b. 3,100,000 d. 2,950,000
2. How much is the amount to be presented as “trade and other receivables” under current
assets?
a. 7,350,000 c. 4,850,000
b. 5,350,000 d. 4,050,000
3. How much loss from receivable financing should be recognized in the income statements?
a. 36,000 c. 86,000
b. 50,000 d. 105,000
PROBLEM 16:
In relation to your audit of Inuyasha Inc.’s accounts receivable you ascertained the following
information:
a. The general ledger balances of the client’s receivable and related accounts were:
Accounts receivables P3,225,300
Allowance for bad debts (169,000)
Amortized cost P3,056,300
Page 10 of 27
b. Inuyasha Inc. estimates its bad debt losses (expected credit losses) by aging its
accounts receivable, the aging schedule of accounts receivable at December 31, 2020,
is presented below:
Age of accounts Amount
Current P1,686,400
1 to 30 days past due 922,000
Over 90 days past due 78,800
c. The company normally sells n/30.
d. Furthermore, the company’s uncollectible accounts experience for the past 5 years are
summarized in the schedule that follows:
Year Current 1 – 30 31 – 60 1 – 90 More than
days PD days PD days PD 90 days
PD
2019 1% 6% 9% 23% 55%
2018 2% 8% 10% 18% 60%
2017 1% 4% 11% 16% 45%
2016 3% 5% 12% 22% 45%
2015 3% 2% 8% 21% 45%
Requirements:
1. What are the corresponding percentages to be used per age category in computing for the
client’s require allowance for bad debts (expected credit losses)?
Current 1 – 30 31 – 60 1 – 90 > 90
a. 1% 3% 10% 20% 45%
b. 1.5% 5% 10% 25% 50%
c. 2% 5% 10% 20% 50%
d. 2% 3% 10% 25% 45%
2. The required allowance for bad debt expense is:

a. 173,653 c. 188,368
b. 185,415 d. 220,842
3. The net realizable value of the company’s accounts receivable on December 31, 2020,
should be:
a. 3,036,932 c. 2,986,345
b. 3,004,458 d. 2,976,540
PROBLEM 17:
The Mexican Corp. grants its customers 30 days credit. The company uses the allowance method
for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by
multiplying 2% by the amount of credit sales for the month. At the fiscal year-end of December
31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible
accounts is adjusted accordingly.
At the end of 2020 before any audit adjustments, the general ledger accounts showed balances
of account receivable at P1,230,000 and the allowance for bad debt at P106,000. Accounts
receivable activity for 2020 included the following:
Credit sales P12,800,000
Write offs, 82,000
The company’s controller prepared the following aging summary of year-end accounts receivable:
Age Group Amount Percent Collectible
0 – 60 days P825,000 98%
61 – 90 days 220,000 90%
91 – 120 days 50,000 70%
Over 120 days 128,000 60%
Total P1,223,000
It was ascertained that P40,000 from the over 120 days accounts are absolutely worthless.
Requirements:
1. How much is the unreconciled difference between the general ledger and the subsidiary
ledger balance of accounts receivable and how should it be accounted for:
Page 11 of 27
a. P7,000; GL prevailing over SL, with the difference being charged against sales.
b. P10,000; GL prevailing over SL, with the difference being charged to bad debt
expense.
c. P7,000; SL prevailing over GL, with the difference being charged against sales.
d. P10,000; SL prevailing over GL, with the difference being charged to bad debt
expense.
2. How much is the total bad debt expense for 2020?
a. 304,700. c. 280,700.
b. 278,700. d. 294,700.
3. How much is the net realizable value of accounts receivable at December 31, 2020?
a. 1,123,000. c. 1,094,300.
b. 1,118,300. d. 1,223,000.
PROBLEM 18:
You are auditing the Accounts Receivable of Rovers Inc. as of December 31, 2020. You found the
following information in the general journal:
Accounts receivable P1,466,720

Less: Allowance for doubtful accounts (46,720)
Accounts receivable net P1,420,000
The accounts receivable subsidiary ledger had the following details:

Customer Invoice date Amount Balance
Gudang 9/12/2020 P139,200 P139,200
Tisoy 12/12/2020 153,600
12/02/2020 99,200 252,800
Gusoy 11/17/2020 185,120
10/08/2020 176,000 361,120
Naning 12/08/2020 160,000
10/25/2020 44,800
8/20/2020 40,000 244,800
Nanong 9/27/2020 96,000 96,000
Balong 8/20/2020 71,360 71,360
Peejong 12/06/2020 112,000
11/29/2020 169,440 281,440
Total P1,446,720
Additional information:
a. You discovered based on your review of subsequent events that Balong recently went
bankrupt, thus your suggested that the amount receivable from the same shall be
written off.
b. You also discovered that the invoice dated 12/02/2020 has already been settled by
Tisoy per OR number 34675. This amount however has been erroneously posted
against Gusoy’s subsidiary ledger as a settlement for an invoice dated 11/05/2020 for
the same amount.
c. The estimated bad debt rates (expected credit loss rates) below are based on the
company’s receivable collection experience:
Age of accounts Expected credit loss rates
0 – 30 days 2%
31 – 60 days 5%
61 – 90 days 10%
91 – 120 days 20%
Over 120 days 50%
Required:
1. Assuming that there were no other entries to the allowance for doubtful accounts, what is
the correct bad debt expense for the year?
a. 95,680 c. 141,984
b. 92,704 d. 144,960
2. What is the correct allowance for bad debt expense for the year ended December 31, 2020?
a. 156,000 c. 120,320
b. 153,024 d. 117,344
3. What is the net adjustment to the Accounts receivable in the general ledger?
a. 172,560 c. 91,360
Page 12 of 27
b. 119,200 d. 71,360
4. What it the carrying value of the company’s accounts receivable as of December 31, 2020?
a. 1,255,040 c. 1,275,040
b. 1,258,016 d. 1,295,040
5. What is the necessary adjusting entry to adjust any unlocated difference between the SL
and GL?
a. Bad debt expense 20,000
Accounts receivable 20,000
b. Sales 20,000
c. Accounts receivable 20,000
Other income 20,000
d. No necessary entry
PROBLEM 19:
You were assigned to audit Natasha Inc.’s accounts receivable which had an unadjusted balance
per books of P755,142, net of an allowance for bad debts amounting to P32,858. Your inquiries
and investigations revealed the following information:
a. The only entries in the Bad debt expense account were:

§ A credit for P1,296 on December 1, 2020, because a customer remitted in full, an
account charged off on October 31, 2020.
§ A debit on December 31, for the amount of the credit to Allowance for bad debt on the
same date.
b. The allowance for bad debt accounts had the following details:
Jan. 1, balance P15,250
June. 30, write off of accounts (1,296)
Aug. 31, write off of accounts (3,280)
Oct. 31, write off of accounts (2,256)
Dec. 31, Bad debt expense (3%*788,000) 23,640
Dec. 31, balance P32,858
Records revealed that the December 31, 2020 bad debt expense was debited to the bad debt
expense account and credited to allowance for bad debt for the amount shown above, while
the write offs credited to accounts receivable amounted only to P6,032. Further investigation
revealed that the correct amounts to be written off were shown in the analysis above.
c. An aging schedule of the accounts receivable as of December 31, 2020, and the decisions
are as shown in the table below:
Amount to which the allowance is to be
adjusted after adjustments and corrections
Age Net debit have been made (Expected Credit Loss)
bal.
0 – 1 month P372,960 1%
1 – 3 months 307,280 2%
3 – 6 months 88,720 3%
Over 6 months 24,000 Definitely uncollectible, P4,000; P8,000 is
considered to be 50% uncollectible; the
remainder is estimated to be 80% collectible.
d. There is a credit balance in one accounts receivable (0 – 1 months) of P8,000; it

represents an advance on a sales contract; also there is a credit balance in one of the 1 –
3 months accounts receivable of P2,000 for which merchandise will be accepted by the
customer.
e. The accounts receivable control account is not in agreement with the subsidiary ledger.
The differences cannot be located, and the company’s accountant decides to adjust the
control to the sum of the subsidiaries after corrections are made.
Requirements:
1. What is the correct bad debt expense for the year?
a. 10,296 c. 13,343
b. 10,640 d. 14,640
2. What is the adjusting journal entry to record the remaining unlocated difference between
the general ledger and the subsidiary ledger after consideration of all adjustments?
Page 13 of 27
a. Accounts receivable P5,760
Bad debt expense P5,760
b. Accounts receivable P5,760
Sales P5,760
c. Accounts receivable P4,960
Sales P4,960
d. Accounts receivable P9,760
Bad debt expense P9,760
3. What is the accounts receivable balance on December 31, 2020?
a. 793,200 c. 798,960
b. 798,160 d. 808,960
4. What is the required allowance for bad debt expense on December 31, 2020?
a. 19,057 c. 29,357
b. 19,857 d. 32,857
5. What is the accounts receivable net of allowance for bad debts?
a. 774,143 c. 779,503
b. 779,103 d. 779,903
PROBLEM 20:
You are auditing the accounts receivable and the related allowance for bad debts account of
Sayote Inc. The control account of the aforementioned accounts had the following balances:
Accounts Receivable P1,270,000

Less: Allowance for bad debt (78,000)
Net Book Value P1,192,000
Upon your investigation, you found out the following information:
a. The company’s normal sales term is n/30.
b. The allowance for bad debt account had the following details in the general ledger:
Allowance for Bad Debts

July 31 Write off 24,000 Jan. 1 Balance 30,000
Dec. 31 Provision 72,000
c. The subsidiary ledger balances of the company’s accounts receivable as of December 31,
2020 contained the following information:
Debit balances Credit balances
Under one month P540,000 Kamote Co. P12,000
One to six months 552,000 Kutchay Corp. 21,000
Over six months 228,000 Kalachuchi Inc. 27,000
P1,320,000 P60,000
Additional information
• The credit balance with Kamote Co. was for an overpayment from the customer. The
company delivered additional merchandise to Kamote Co. on January 3, 2021 to cover
such overstatement.
• The credit balance of Kutchay Corp. was due to a posting error, the amount should
have been credited to Kutchara Corp for a 60 day outstanding receivable.
• The credit balance from Kalachuchi Inc. was a cash advance for a delivery to be made
on January 15 the following year.
d. It was estimated that the expected credit loss is 1 percent of accounts aged under one
month while the expected credit loss is 2 percent for accounts aged one to six. The
accounts over six months are analyzed as follows:
Definitely uncollectible (required write-off) P72,000
Doubtful (expected credit loss at 50%) 36,000
Apparently good, but slow (expected credit loss at 10%) 120,000
Total P228,000
Required: Based on your audit, answer the following:
1. What is the entry to adjust any unlocated difference between the control account and the
subsidiary ledger?
Page 14 of 27
a. Sales 10,000
b. Accounts receivable 10,000
Sales 10,000
c. Sales 14,000
d. No unlocated difference
2. The adjusted accounts receivable balance on December 31, 2020, should be
a. 1,212,000 c. 1,239,000
b. 1,227,000 d. 1,260,000
3. The required balance of the allowance for bad debts account on December 31, 2020, is
a. 46,020 c. 64,020
b. 46,440 d. 142,020
4. The entry to adjust the allowance for bad debts account is
a. Bad debts expense 46,020
Allowance for bad debts 46,020
b. Bad debts expense 52,020
c. Allowance for bad debts 6,000
Bad debts expense 6,000
d. Bad debts expense 40,020
PROBLEM 21:
The substantiate the existence of the accounts receivable balances as at December 31, 2020 of
Lucrative Company, you have decided to send confirmation requests to customers. Below is a
summary of the 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 Balance Per Books Comments from Customers Audit Findings
Cruz P50,000 P30,000 was returned on Returned goods were
January 2, 2020. Correct received January 5,
balance is P20,000. 2020.
Frias P10,000 Your CM representing price The CM was taken up
adjustment dated December by Lucrative in 2021.
29, 2020 cancels this.
Lazo P48,000 You have overpriced us by The complaint is
P50. Correct price should be valid.
P100.
Sia P37,500 We received the gods only Term is shipping
on January 5, 2021 point. Shipped in
2020
Yao P45,000 Balance was offset by our Lucrative credited
December shipment of your accounts payable for
raw materials. P45,000 to record
purchases. Yao is a
supplier
Requirements:
1. If the necessary adjusting journal entry is made regarding the case of Mr. Cruz, the net
income will:
a. increase by b. decrease by c. decrease by d. increase by
P6,000 P30,000 P6,000 P30,000
2. The effect on 2020 net income of Lucrative Company of its failure to record CM involving
transaction with Mr. Frias:
a. P10,000 over b. P10,000 under c. P2,000 over d. P2,000 under
3. The actual number of units sold to Mr. Lazo is:

a. 960 b. 320 c. 480 d. 1,920
4. The overstatement of receivable from Mr. Lazo is:

a. 32,000 b. 8,000 c. 24,000 d. 16,000
5. The accounts receivable from Mr. Sia is:

a. correctly stated b. 37,500 over c. 37,500 under d. 75,000 over
Page 15 of 27
6. The adjusting journal entry to correct the receivable from Mr. Yao is;
a. Purchases 45,000
b. Accounts payable 45,000
Purchases 45,000
c. Accounts receivable 45,000
Accounts payable 45,000
d. Accounts payable 45,000
PROBLEM 22:
On December 31, 2019, ISIAH Company, a financing institution lent P4,000,000 to PSALMS Corp.
due 3 years after. The loan is supported by an 8% note receivable. Transaction costs incurred to
originate the loan amounted to P248,000. P374,000 was chargeable to Psalms as origination
fees. Interest on the loan are collectible at the end of each year. The yield rate on the loan is
9.25%. The company estimated at origination date that receivable is fully collectible thus did not
initially provide loss arising from 12 month expected credit loss (ECL).
Isiah was able to collect interest as it became due at the end of 2020. There was no evidence of
significant increase in credit risk by the end 2020 and that the receivable is determined to have
“low credit risk”.
During 2021, however, due to Psalms Corporation’s business deterioration and due to political
instability and faltering global economy, the company was not able to collect amounts due at the
end 2021. After reviewing all available evidence at December 31, 2021, Isiah Company
determined that it was probable that Psalms would pay back only P3,400,000 collectible as
follows:
December 31, 2023 P1,400,000
December 31, 2024 1,000,000
December 31, 2025 600,000
December 31, 2026 400,000
As of December 31, 2021, the prevailing rate of interest for all debt instruments is 14%.
Based on the above information and on your audit, answer the following requirements:
1. What is the carrying value of the loans receivables as of December 31, 2020?
a. 3,874,000 b. 3,912,345 c. 3,954,237 d. 4,000,000
2. What is the impairment loss to be recognized in the 2021 statement of comprehensive

income?
a. 1,336,188 b. 1,294,296 c. 1,094,018 d. 1,656,188
3. What is the interest income to be recognized in the 2023 statement of comprehensive

income?
a. 228,818 b. 264,570 c. 159,542 d. 242,170
4. What is the correct carrying value of the loans receivable as of December 31, 2023?
a. 2,860,219 b. 2,013,832 c. 1,724,789 d. 1,884,332
PROBLEM 23:
On December 31, 2019, Leni Company, a financing institution lent P10,000,000 to Digong Corp.
due 3 years after. The loan is supported by an 10% note receivable. Based on the company’s
initial estimates the present value of the 12 months expected credit loss (ECL) discounted at 9%
is at 1,000,000. The probability of default (PD) is at 5%.
Leni Company was able to collect interest as it became due at the end of 2020. There was no
evidence of significant increase in credit risk by the end 2020 and that the receivable is
determined to have “low credit risk”. There were no changes in its initial estimate of the 12
months expected credit loss either.
Page 16 of 27
By the end of 2021, Leni Company was able to collect interest as it became due. Based on
available forward-looking information (determinable without undue cost or effort), however, there
is an evidence that there was a significant increase in credit risk by the end of 2021. Leni
Company therefore had to change its basis of calculation of the loss allowance from 12 months
ECL to lifetime expected credit loss. The present value of the lifetime expected credit loss
discounted at 9% is at 4,000,000. The probability of default (PD) is at 20%.
During 2022, however, due to Digong Corp.’s business deterioration and significant financial
difficulties, the company was not able to collect amounts due at the end 2022. After reviewing all
available evidence at December 31, 2022, Leni Company determined that the receivable is credit-
impaired and that impairment loss should be recognized. Leni Company also entered into the
following concessions with Digong Corp.:
a. Interest due in 2022 is waived.
b. Only 8M of the principal shall be collected in 2 equal installments, at the end of 2023 and
2024.
c. Annual interest on the 8M revised principal shall be collected at 12% at the end of each
year for the next two years (based on outstanding balance).
As of December 31, 2022, the prevailing rate of interest for all debt instruments is 14%.
Based on the above information and on your audit, answer the following requirements:
1. What is initial carrying value of the loans receivables as of December 31, 2019?
a. 10,000,000 b. 9,900,000 c. 9,950,000 d. 9,000,000
2. What is the net amount to be recognized in the profit or loss for 2020 in relation to the
loan?
a. 995,500 b. 995,000 c. 990,000 d. 1,000,000
3. What is the carrying value of the loans receivable as of December 31, 2021?
a. 10,000,000 b. 9,000,000 c. 9,200,000 d. 6,000,000
4. What is the carrying value of the loans receivable as of December 31, 2022 after
impairment recognition?
a. 8,000,000 b. 8,123,0231 c. 9,211,570 d. 8,211,570
PROBLEM 24:
Visage Corp. had the following receivable financing transactions during the year:
§ On March 1, 2020, Visage Corp. factored P500,000 of its accounts receivables to BPI. As of
the date of factoring, it was ascertained that P20,000 of the accounts receivable is doubtful
of collection. BPI advanced P350,000 cash to Visage Corp. and withheld P50,000 as factors
holdback (to cover future sales discount and sales returns and allowances). The company
incurred P10,000 direct transaction costs (legal fees and other professional fees) related to
the factoring. The factoring was done on a without-recourse basis, thus transferring all
significant risks and rewards associated to the receivable to BPI.
§ On May 1, 2020, Visage Corp. assigned P800,000 of its outstanding accounts receivable to
BPI in consideration of a P500,000, 24% loan. BPI charged the company 2% of the accounts
assigned as service charge. By the end of May, Visage Corp. collected P200,000 cash from
the assigned accounts net of a P5,000 sales discount. By the end of June, Visage Corp.
collected another P150,000 from the assigned accounts after P4,000 sales discount. The
company accepted merchandise originally invoiced at P30,000 as sales returns and wrote-off
P20,000 of the assigned accounts as worthless. It was agreed between parties that monthly
collections shall be remitted to the bank as partial payment of the loan and interest.
§ On July 1, 2020, Visage Corp. accepted from a customer a 6-month P600,000, 12% notes
receivable for the sale of merchandise. On October 31, 2020, Visage Corp. discounted the
note to BPI at a discount rate of 10%. The discounting was done on a without-recourse
basis, thus transferring all significant risks and rewards associated to the receivable to BPI.
Requirements:
1. How much should be reported as gain/loss in the income statement on the transfer of
receivables on the factoring of receivable on March 1?
a. 90,000 b. 100,000 c. 80,000 d. none
Page 17 of 27
receivables on the assignment of receivable on May 1?
a. 16,000 b. 126,000 c. 316,000 d. none
3. What is the carrying value of the accounts receivable-assigned as of June 30?

a. 391,000 b. 400,000 c. 450,000 d. none
4. What is the carrying value of the loans payable related to the accounts receivable assigned
as of June 30?
a. 150,000 b. 166,200 c. 310,000 d. none
receivables on the discounting of the note receivable on July 1?
a. 10,600 b. 1,400 c. 24,000 d. none
PROBLEM 25:
The cash account in the ledger of Ilang-Ilang Company had a balance of P105,600 at December
31, 2020. An examination of the account, however, disclosed the following:
1. The sales book was left open up to January 5, 2021, and cash sales totaling P15,000 were
considered as sales in December.
2. Checks of P9,300 in payment of liabilities were prepared before December 31, 2020,
recorded in the books, but not mailed or delivered to payees
3. Post-dated customer collection checks totaling P7,800 are being held by the cashier as
part of cash. The company’s experience shows that post-dated checks are eventually
realized.
4. Customer’s check for P1,500 deposited with but returned by bank, “NSF”, on December
27, 2020. Return was not recorded in the books.
5. The cash account includes P40,000 earmarked for the purchase of a mini-computer which
will soon be delivered.
The cash balance to be shown on the balance sheet on December 31, 2020 should be:
a. P105,600 c. P58,400
b. P50,600 d. P60,500
PROBLEM 26:
In connection with your audit of BIG BROTHER CORP. for the year ended December 31, 2020,
you gathered the following information:
Current account at Bank of the Philippine Islands P6,000,000

Current account at Equitable PCI Bank (300,000)
Payroll account 1,500,000
Foreign bank account – restricted (in USD) ** 60,000
Postage stamps 3,000
Employee’s post dated check 12,000
IOU from a key officer 30,000
Credit memo from a vendor for a purchase return 60,000
Traveler’s check 150,000
Customer’s not-sufficient-funds check 45,000
Money orders 90,000
Petty cash fund (P12,000 in currency and expense 30,000
vouchers for P18,000)
Treasury bills, due 3/31/21 (purchased 12/31/20) 600,000
Treasury bills, due 1/31/21 (purchased 1/1/20) 900,000
Change fund 10,000
Bond sinking fund 1,000,000
**current exchange rate as of December 31, 2020 is at P50 for every USD1.
Requirements:
Page 18 of 27
1. What is the total cash and cash equivalent to be reported by the company in its December
31, 2020 balance sheet?
a. 9,262,000 c. 8,362,000
b. 8,380,000 d. 8,122,000
2. How much from the list above should be presented as part of Noncurrent assets?
a. 1,000,000 c. 4,900,000
b. 4,000,000 d. 5,500,000
PROBLEM 27:
UHAWSAIYO COMPANY
General and Petty Cash Count
Audit Year: 2020
Date of count – January 5, 2021, 9:10 am
Bills and Coins

Denom. Bundles of 100 pcs Rolls of 50 coins Loose
P500 1 9
100 2 27
50 3 5
20 5 4
10 10
5 6 4
1 10 20
.25 40 16
Checks
Maker Payee Date Amount
T. Otis – customer Uhawsaiyo 12/30/20 P11,920
R. Eyes – customer Uhawsaiyo 12/26/20 12,505
O. Liever – customer Uhawsaiyo 1/2/21 5,707
F. Rancisco – customer Uhawsaiyo 12/21/20 13,350
Uhawsaiyo ABC Co. 12/27/20 14,500
M. Doza – officer Cash 1/5/21 310
O. Campo * Cash 12/29/21 260
*Amount is for a return of travel advance made to the employee in an earlier period.
Vouchers and IOUS

Paid to Date Amount
PNR – transportation expense 1/2/21 P35
Post office – postage stamps 12/20/20 150
Italian Village – Christmas party 12/23/20 6,290
I. Dio – IOU 12/27/20 300
Others
1. Cash sales invoices (all currencies No. 17903 to 18112), P100,500
2. Official receipts
Number Amount Form of Collection
31250 P560 Cash
31251 12,505 Check
31252 1,202 Cash
31253 11,920 Check
31254 13,350 Check
3. Stamps of various denomination amounted to P80.
4. A notation on a sheet of paper as follows:

“Proceeds from employee contribution for Christmas Party, P9,500”
5. Petty cash per ledger, P15,000.
Required:
1. How much is the petty cash shortage as of January 5, 2021?
a. 13,913 c. 15,303
b. 14,503 d. none
Page 19 of 27
2. The adjustment to correct petty cash fund involves a credit to petty cash fund at:
a. 15,000 c. 14,988
b. 14,953 d. 14,688
3. What is the adjusted petty cash fund as of December 31, 2020?
a. 0 c. 12
b. 47 d. 312
PROBLEM 28:
The Silver Company’s internal control over its cash transaction is very weak. The company’s
cash position at December 31, 2020 were as follows:
The cash book showed a balance of P15,000, which included cash on hand. A credit of P150 on
the bank’s records did not appear on the company’s books. The bank statement showed a
balance of P12,300; and the outstanding checks were: 0100 – P120; 0201 – P100; 0300 –
P230; 1501 – P110; 1510 – P140; and 1515 – P150.
The cashier removed all of the cash on hand in excess of P3,000 and then prepared the following
reconciliation:
Balance per books, Dec. 31, 2020 P15,000
Add: Outstanding checks:
No. 1501 P110
1510 140
1515 150 300
P15,300
Deduct: Cash on hand 3,000
Balance per bank, Dec. 31, 2020 12,300
Deduct: Unrecorded credit 150
True cash, Dec. 31, 2020 P12,150
1. What is the cash shortage?

a. 300 c. 500
b. 400 d. 700
2. A correct reconciliation will show that the cashier’s accountability for cash on hand is:
a. 3,300 c. 3,500
b. 3,400 d. 3,700
3. The adjusted cash in bank excluding cash on hand as of December 31, 2020 is:
a. 11,300 c. 11,600
b. 11,450 d. 11,850
4. The adjusted cash balance to be reported in the Statement of Financial Position as of
December 31, 2020:
a. 14,300 c. 14,600
b. 14,450 d. 14,850
PROBLEM 29:
You are auditing the cash account of Carrera Inc. for the fiscal year ended July 31, 2020. The
client has not prepared the July 31, bank reconciliation. The following information were made
available:
General Ledger Bank Statement

Beginning balances P140,330 P172,590
Deposits 751,680
Cash receipts journal 763,680
Checks clearing the bank (708,450)
Cash disbursements (654,330)
journal
July bank service charge (2,610)
Note paid by the bank (183,000)
NSF check (9,330)
Ending balances P249,680 P20,880
Audit notes:
a. Bank reconciliation in June included the following information: Bank statement balance,
June, P172,590; Deposits in transit, P18,000; Outstanding checks, P52,260, and; Balance
per general ledger, June, P140,330.
Page 20 of 27
b. Checks clearing the bank in July, outstanding by the end of June was at P50,760.
c. Checks clearing the bank in July and were recorded in the July cash disbursement journal was
at P614,010.
d. A check for P31,800 cleared the bank, but had not been recorded in the cash disbursement
journal. It was for a payment of an accounts payable.
e. A check for P11,880 was erroneously charged by the bank to Carrera Inc.
f. Deposits included P18,000 from June and P733,680 from July.
g. The bank charged Carrera Inc.’s account for a non-sufficient-fund check totaling to P9,330.
The credit manager concluded that the customer intentionally closed its account and the
owner left the city. The check was turned over to a collection agency.
h. A note for P174,000, plus interest, was paid directly by the bank under an agreement
signed four months ago. The note payable was recorded at P174,000 on Carrera Inc.’s
books.
Required: Based on your audit procedures and appreciation of the above data, answer the
following:
1. How much is the total outstanding checks as of July 31?
a. 29,940 c. 41,820
b. 32,490 d. 10,020
2. How much is the deposit in transit as of July 31?
a. 20,940 c. 18,000
b. 30,000 d. 27,330
3. What is the correct cash in bank balance as of July 31?
a. 20,940 c. 32,820
b. 11,160 d. 9,060
4. How much is the cash in bank shortage as of June 31?
a. none c. 2,000
b. 1,200 d. 2,200
PROBLEM 30:
In the course of our audit of Volumatic Inc.’s cash in bank for the year ended December 31,
2020, you ascertained the following information:
November 30 December 31
Cash per books P82,350 P201,425
Cash per bank statements 535,410 689,085
Undeposited collections 41,005 64,400
Outstanding checks 138,590 150,560
Bank service charges 3,600 3,000
Insufficient fund check 41,250
Company’s notes receivable
collected by bank 359,075 404,500
The bank statement and the company’s cash records show the following totals:
Checks and debit memos per bank statement P1,091,865

Cash receipts per cash records ?
Cash disbursements per cash records ?
Deposits and credit memos per bank statement 1,245,540
The insufficient fund check was redeposited in the same month. No entries are made to take up
the return and redeposit.
Requirements:
1. What is the unadjusted book receipts in December?
a. 1,227,685 c. 1,160,660
b. 1,182,260 d. 823,185
2. What is the unadjsuted book disbursements in December?
a. 1,059,585 c. 1,063,785
Page 21 of 27
b. 1,063,185 d. 1,066,185
3. What is the adjusted book balance on November 30?
a. 434,825 c. 441,425
b. 437,825 d. 445,025
4. The adjusted bank receipts in December should be:
a. 1,268,935 c. 1,265,335
b. 1,268,337 d. 1,245,540
5. The adjusted bank disbursements in December should be:
a. 1,105,035 c. 1,097,835
b. 1,103,835 d. 1,091,865
6. What is the adjusted book balance on December 31?
a. 561,075 c. 605,325
b. 602,925 d. 644,175
PROBLEM 31:
Shown below is the May 31, 2020, bank reconciliation prepared by HALALAN CORP.’s staff:
Halalan Corp.
Bank Reconciliation: BPI Acct No. 0021261
May 31, 2020
Bank balance P652,000
Add: Deposit in transit 10,000
Total P662,000
Less: Outstanding checks
No. 640 P10,000
652 8,000
653 2,000 20,000
Adjusted balance P642,000
Book balance P570,800

Add: Proceeds of note receivable collected in May P70,000
Deposit on May 31 not recorded on books
until June 2,000 72,000
Total P642,800
Less: Bank service charge 800
The June 2020 bank statement is shown below:
Bank of the Philippine Island

From May 31, 2020 to June 30, 2020
Account No.: 0021261
Date Checks Deposit
June 1 P8,000 P10,000
June 8 2,000
June 11 14,000 20,000
June 13 1,000 DM 1,000
June 16 4,000
June 21 12,000 56,000
June 27 18,000
June 29 1,000 EC 1,000 EC
June 30 200 SV
June 30 3,000 DM
SV – Service Charge DM – Debit Memo

EC – Error Corrected CM – Credit Memo
The paid checks accompanying this bank statement (all clearing in June) are the following:
No. 652 P8,000
No. 653 2,000
No. 654 14,000
No. 655 4,000
No. 657 12,000
No. 658 18,000
Page 22 of 27
The check register reveals that the last check issued in June is No. 659 for P5,000 and that check
no. 656 is for P2,600. Cash received for the period June 22 through June 30 of P70,000 was
deposited in the bank on July 1. The bank erroneously charged the company P1,000 on June 29
but immediately corrected the error on the same date.
The debit memos on June 13 and June 30 represent customers’ NSF checks returned by the
bank. The June 13 NSF check was immediately redeposited without entry. The June 30 NSF
check was redeposited on July 1 without entry.
1. What is the total bank receipts in June per bank statement?

a. 87,000 b. 88,000 c. 77,000 d. 78,000
2. What is the total bank disbursements in June per bank statement?

a. 59,200 b. 58,000 c. 58,200 d. 63,200
3. What is the balance per bank statement on June 30, 2020?

a. 676,800 b. 627,200 c. 732,400 d. 729,200
4. What is the total receipts in June per books?

a. 88,000 b. 220,000 c. 146,000 d. 218,000
5. What is the total disbursement in June per books?

a. 53,000 b. 57,400 c. 56,400 d. 63,200
6. What is the cash balance per books on June 30, 2020?

a. 732,200 b. 729,200 c. 732,400 d. 676,800
PROBLEM 32:
You are auditing the cash of Saluyot Corp. for the fiscal year ended September 30, 2020.
The bank reconciliation prepared by the accountant of Saluyot Corp. for the months of August is
presented below:
Bank balance, per bank statement P156,000
Add: Deposit in transit, August 31 2,700
Total 158,700
Less: Outstanding checks:
No. 547 P600
561 5,400
562 4,200
565 1,800 12,000
Book balance, per general ledger P120,000

Add: Proceeds of note receivable collected
by bank in August 24,000
Deposit made in bank on August 31
not recorded on books until
September 3,000
Total 147,000
Less: Bank Service charge 300
There was no available bank reconciliation for the month of September, instead, the accountant
provided you a copy of the September bank statement to aid you in your audit.
The September bank statement included the following bank debits and credits:
Date Particulars Debits Credits
August 31
September 1 Chk #561 5,400 2,700
September 6 Chk #562 4,200
September 9 Chk #565 1,800 30,000
September 12 420 DM 420
September 17 600
Page 23 of 27
September 20 Chk #567 2,100 42,000
September 29 300 EC 300 EC
September 30 1,320 SV
September 30 900 DM
SV—Service charges DM—Debit Memo
EC—Error Corrected CM—Credit Memo
Further investigation revealed the following information:
a. All book reconciling items during August has been recorded in September
b. The check register revealed that the last check issued in September was No. 571 for
P3,000 and that check No.568 was P7,200.
c. Cash received for the period September 25 through 31 of P28,200 was deposited in the
bank on October 1.
d. The debit memo on September 12 and September 30 were customer NSF checks returned
by the bank. The check on September 12 was immediately redeposited without entry. The
check returned on September 31 was redeposited by the client in the bank on October 1
also without entry.
e. Among the bank credits for the month was P600 deposit of Baluyot Corp. credited by the
bank to the company’s account.
Required: Based on your audit procedures and appreciation of the above data, answer the
following:
1. How much is the unadjusted bank balance as of September 30, 2020?

a. 101,100 b. 109,200 c. 192,900 d. 202,800
2. How much is the total book receipts for September?

a. 75,420 b. 106,620 c. 127,200 d. 129,900
3. How much is the total book disbursements for September?

a. 25,080 b. 25,380 c. 26,280 d. 29,220
4. How much is the unadjusted book balance as of September 30, 2020?

a. 221,820 b. 222,120 c. 224,620 d. 224,920
5. How much is the adjusted cash balance as of September 31, 2020?

a. 219,000 b. 219,600 c. 220,200 d. 221,820
PROBLEM 33:
The following information was obtained in connection with the audit of Wise Company’s cash
account as of December 31, 2020:
Outstanding checks, 11/30/2020 P16,250
Outstanding checks, 12/31/2020 12,500
Deposit in transit, 11/30/2020 12,500
Cash balance per general ledger 12/31/2020 37,500
Actual company collections from its customers during December 152,500
Company checks paid by bank in December 130,000
Bank service charges recorded on the company books in
December 2,500
Bank service charges per December bank statement 3,250
Deposits credited by bank during December 145,000
November bank service charges recorded on company books in
December 1,500
The cash receipts book of December is underfooted by P2,500.
The bank erroneously charged the company’s account for a P3,750 check of another depositor.
This bank error was corrected in January 2021.
Page 24 of 27
1. How much is the deposit in transit on December 31, 2020?
a. 5,000 b. 20,000 c. 22,500 d. 17,500
2. The total unrecorded bank service charges as of December 31, 2020?

a. 750 b. 2,250 c. 1,750 d. 4,250
3. What is the total book receipts in December?

a. 150,000 b. 152,500 c. 155,000 d. 147,500
4. What is the total amount of company checks issued in December?

a. 130,000 b. 123,000 c. 133,750 d. 126,250
5. What is the total book disbursements in December?

a. 123,750 b. 128,500 c. 126,250 d. 128,750
6. What is the book balance on November 30, 2020?

a. 16,250 b. 21,250 c. 37,500 d. 35,000
7. What is the bank balance on November 30, 2020?

a. 23,000 b. 18,500 c. 43,500 d. 16,250
8. What is the total bank receipts in December?

a. 120,000 b. 140,000 c. 145,000 d. 150,000
9. What is the total bank disbursements in December?

a. 154,500 b. 132,500 c. 129,500 d. 137,000
10. What is the bank balance on December 31, 2020?

a. 21,500 b. 26,500 c. 31,000 d. 33,250
PROBLEM 34:
In your audit of I-Bot Inc.’s cash account as of December 31, 2020, you ascertained the following
information:
The bookkeeper’s bank reconciliation on November 30, 2020, is as follows:

Bank balance per bank statement, November 30 P24,298
Add: Deposit in transit 3,648
Total P27,946
Less: Outstanding checks
No. 3408 P440
3413 300
3414 6,820
3416 3,924
3417 800 12,284
Balance P15,662
Add: Bank service charge for November 36 *
Balance per books P15,698
*Entered in Check Register in December
The Cash Receipts Journal shows a total receipts for December of P371,766. The Check Register
reflects total checks issued in December of P377,632. A collection of P5,912 was recorded on
company books on December 31 but was not deposited until January 2, 2021.
The balance per bank statement at December 31, 2020, is P17,516. This statement shows total
receipts of P373,502 and checks and other charges paid of P380,284.
Your examination revealed the following additional information:
a. Check no. 3413 dated November 24, 2020, was entered in the Check Register as P300.
Your examination of the paid returned with the December bank statement reveals that the
amount of the check is P30.
b. Check no. 3417 was mutilated and returned by the payee. A replacement check (no.
3453) was issued. Both checks were entered in the Check Register but no entry was
made to cancel check no. 3417.
c. The December bank statement includes an erroneous bank charge of P480.
Page 25 of 27
d. On January 3, 2021, the bank informed your client that a December bank charge of P42
was omitted from the statement.
e. Your examination of the bank credit memo accompanying the December bank statement
discloses that it represents proceeds from the note collection in December for P4,000.
f. The outstanding checks at December 31, 2020, are as follows:
No. 3408 P440
No. 3417 800
No. 3418 2,814
No. 3419 5,788
1. What is the total book disbursements for the month of December?

a. 377,668 b. 377,710 c. 377,632 d. 377,596
2. What is the book balance at December 31?

a. 9,832 b. 9,868 c. 9,754 d. 9,796
3. What is the total outstanding checks at December 31?

a. 8,602 b. 9,072 c. 9,042 d. 9,842
4. What is the adjusted bank balance on November 30?

a. 16,690 b. 16,732 c. 16,804 d. 16,774
5. What is the adjusted book receipts for the month of December?

a. 375,724 b. 371,766 c. 371,238 d. 375,766
6. What is the adjusted book disbursements for the month of December?

a. 377,590 b. 377,662 c. 377,674 d. 377,632

a. 14,824 b. 14,866 c. 14,908 d. 14,782
PROBLEM 35:
Halal Corp. has a current account in PNB. Your audit of the company’s cash account reveals the
following:
a. Balances taken from the company’s general ledger:

Cash balance, November 30, 2020 P637,860
Cash balance, December 31, 2020 576,420
Receipts, December 1 – 31, 2020 306,220
b. Balances taken from the December bank statement:

Bank balance, November 30, 2020 P685,180
Bank balance, December 31, 2020 637,220
Disbursements (debit) 356,080
c. Outstanding checks, November 30, 2020 (P26,140 was paid by the bank in December),
P64,140.
d. Checks written and recorded in December; not included in the checks returned with the
December bank statement, P36,080.
e. Deposit in transit, November 30, 2020, P15,260.
f. Deposit in transit, December 31, 2020, P16,140.
g. A bank credit memo was issued in December to correct an erroneous charge made in
November, P1,500.
h. Note collected by bank in December (company was not informed of the collection),
P2,060.
i. A check for P2,020 (payable to a supplier) was recorded in the Check Register in
December as P3,000.
j. A check for P2,240 was charged by the bank as P2,420 in December.
Page 26 of 27
k. Halal Co. issued a stop payment order to bank in December. This pertains to a check
written in December which was not received by the payee. A new check was written and
recorded in the Check Register in December. The old check was written off by a journal
entry also in December, P780.
l. Bank service charge, November 30, 2020, P60.
Requirements:
1. What is the total book disbursements in December?
a. 367,660 b. 244,780 c. 369,720 d. 368,540
2. What is the total bank receipts in December?

a. 260,160 b. 308,120 c. 306,060 d. 309,020
3. What is the total outstanding check on December 31?

a. 100,220 b. 38,000 c. 62,220 d. 74,080
4. What is the adjusted bank balance on November 30?

a. 636,300 b. 685,180 c. 637,800 d. 634,800
5. What is the adjusted book receipts in December?

a. 307,500 b. 306,220 c. 303,380 d. 305,440
6. What is the adjusted bank disbursements in December?

a. 353,980 b. 365,840 c. 345,960 d. 366,020

a. 577,500 b. 577,400 c. 576,420 d. 579,460
Page 27 of 27

Ap-500Q: Quizzer On Purchasing/Disbursement Production and Revenue/Receipt Cycles: Audit of Inventories, Receivables and Cash and Cash Equivalents

Uploaded by

Copyright:

Available Formats

Ap-500Q: Quizzer On Purchasing/Disbursement Production and Revenue/Receipt Cycles: Audit of Inventories, Receivables and Cash and Cash Equivalents

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ap-500Q: Quizzer On Purchasing/Disbursement Production and Revenue/Receipt Cycles: Audit of Inventories, Receivables and Cash and Cash Equivalents

Uploaded by

Copyright:

Available Formats

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 41  May 2021 CPA Licensure Examination  Quizzer

AUDITING (Auditing Problems) S. Ireneo  C. Espenilla

AP-500Q: QUIZZER ON PURCHASING/DISBURSEMENT;

Cost of goods out on consignment at another company’s store P2,400,000

Page 1 of 27 0915-2303213  www.resacpareview.com

• A shipment of goods invoiced at P182,000 to a customer on December 29, terms

Requirements: Based on the result of your audit ascertain the following:

Inventory at December 31, 2020 (based on physical count in Bird’s

Your audit reveals the following information:

The physical inventory compilation includes P750 of merchandise received on

Requirements: Adjusted balances at December 31, 2020 of:

A review of December transactions disclosed the following:

5. On December 27 the Pampanga warehouse notified the tabulating department to remove

As of January 1, 2020 As of May 31, 2020

Sales, January 1 through May 2, 2020 P380,000

1. Lower of cost or average/Conservative/Conventional Approach

3. FIFO Retail Approach

4. What is the correct carrying value of inventories as of December 31?

Quantity Cost NRV Amount

The general ledgers showed the following balances:

The following information were further furnished to you by the client:

Finished Goods Item M Item P Item Q

Raw Materials – Item M A B C

Raw Materials – Item P X Y Z

Raw Materials – Item Q D E

Trade accounts receivable P1,550,000

c. The company normally sells n/30.

2. The required allowance for bad debt expense is:

Accounts receivable P1,466,720

The accounts receivable subsidiary ledger had the following details:

a. The only entries in the Bad debt expense account were:

d. There is a credit balance in one accounts receivable (0 – 1 months) of P8,000; it

Accounts Receivable P1,270,000

Upon your investigation, you found out the following information:

a. The company’s normal sales term is n/30.

Allowance for Bad Debts

Required: Based on your audit, answer the following:

3. The actual number of units sold to Mr. Lazo is:

4. The overstatement of receivable from Mr. Lazo is:

5. The accounts receivable from Mr. Sia is:

2. What is the impairment loss to be recognized in the 2021 statement of comprehensive

3. What is the interest income to be recognized in the 2023 statement of comprehensive

3. What is the carrying value of the accounts receivable-assigned as of June 30?

Current account at Bank of the Philippine Islands P6,000,000

Bills and Coins

Vouchers and IOUS

3. Stamps of various denomination amounted to P80.

4. A notation on a sheet of paper as follows:

5. Petty cash per ledger, P15,000.

1. What is the cash shortage?

General Ledger Bank Statement

f. Deposits included P18,000 from June and P733,680 from July.

Checks and debit memos per bank statement P1,091,865

Book balance P570,800

The June 2020 bank statement is shown below:

Bank of the Philippine Island

SV – Service Charge DM – Debit Memo

CPA Review Batch 41 May 2021 CPA Licensure Examination Quizzer

AUDITING (Auditing Problems) S. Ireneo C. Espenilla

Page 1 of 27 0915-2303213 www.resacpareview.com