CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
AP 94 PW SOL
AUDITING PROBLEMS
CPA Review
SITUATIONAL
Situation 1 – DIONISIO CORP.
Current account at
Treasury bills
Payroll account
Traveler’s check
Money order
Petty cash fund
Total cash and cash equivalents
P
390,000
21,000
12,900
P861,900
Answer: D
Situation 2 – SAMANTHA, INC.
1.
Currency
Petty cash vouchers
Replenishment check
Employee’s NSF check
Petty cash accounted for
Petty cash fund per ledger (custodian’s accountability)
Petty cash shortage
P1,650
7,200
1,000
13,810
16,000
P2,190
Answer: B
2.
P
Adjusted petty cash balance
P8,850
Answer: D
Situation 3 – DION COMPANY
1.
Outstanding checks, June 30
Add: Checks issued in July
P 17,420
Total
Less: Checks paid by bank in July (P236,150 – P3,960 erroneous check
charged by bank)
Outstanding checks, July 31
246,130
232,190
P 13,940
Answer: C
Alternative computation:
Checks outstanding on June 30 that did not clear in July
(
)
Checks issued in July that did not clear in July (
Outstanding checks, July 31
Page 1 of 4 Pages
)
P 500
13,440
P13,940
AP 94 PW SOL
CPAR - MANILA
2.
Deposits in transit, June 30
Add: July deposits per cash receipts journal
Total
Less: Deposits credited by bank in July
Deposits in transit, July 31
3.
P 6,000
254,560
260,560
250,560
P10,000
Answer: B
Unadjusted balances
Outstanding checks (see no. 1)
Deposits in transit (see no. 2)
Bank service charge
Unrecorded check
Check erroneously charged to Dion
NSF check
Note payment (
Adjusted balances
Book
Bank
P82,560
P 6,960
P 6,980
P 6,980
)
Answer: A
Situation 4 – LAGUNDI COMPANY
1. No effect on total assets and net income for 2023. The entry to record the write off is:
Allowance for doubtful accounts
Accounts receivable
20,000
20,000
Answer: C
2. Credit sales (
)
Less: Sales discounts
Sales returns and allowances
Net sales
Multiply by bad debt rate
Doubtful accounts expense
P
P250,000
350,000
600,000
x 1.5%
P
Answer:
3. Doubtful accounts expense
Allowance for doubtful accounts
Accounts
Age
Receivable Balance
Less than 60 days
P780,000
61-90 days
230,000
91-120 days
420,000
Over 120 days
50,000
Required allowance
Allowance balance (
)
Adjustment – increase in allowance
Rate
1%
5%
15%
40%
Amount
P 7,800
11,500
63,000
20,000
102,300
(
)
P
Answer:
4. Accounts receivable
Less: Allowance for doubtful accounts (see no. 3)
Net realizable value, Dec. 31, 2023
Answer:
Page 2 of 4 Pages
P1,480,000
P
AP 94 PW SOL
CPAR - MANILA
5. Assessing the allowance for doubtful accounts for reasonableness.
Answer: D
Situation 5 – PIG, INC.
Inventory quantity, Nov. 30
Add: December purchases:
PO Date
12.05.23 Purchased under FOB Destination
term; received 12.22.23
12.18.23 Purchased under FOB Shipping
Point term; shipped 12.29.23
Units available for sale
Less: Units sold in December:
Consignment sales
Other sales (138,630 – 40,000)
Inventory quantity, Dec. 31
145,730
3,600
8,000
15,200
98,630
11,600
157,330
113,830
43,500
1. Goods purchased in December
Answer: A
11,600
2. Goods sold in December
Answer: B
113,830
3. Inventory quantity, December 31
Answer: C
43,500
4. Purchased and received before year-end was recorded.
Answer: C
5. Sale in the current period.
Answer: C
Situation 6 – SUPERPOWER COMPANY
Patent
Less: Amortization (
Goodwill
Franchise
Less: Amortization (
Copyright
Less: Amortization (
Total carrying value, Dec. 31, 2023
)
)
)
P870,000
108,750
P900,000
45,000
P312,000
26,000
P 761,250
720,000
855,000
286,000
P2,622,250
Answer: B
Situation 7 – DADANG Company
1.
Accounts payable per book
Unreleased checks
Understatement of book disbursement
(
)
Unrecorded purchase
Accrued expenses
Page 3 of 4 Pages
P523,100
AP 94 PW SOL
CPAR - MANILA
Cash advance from the company president
Advance payment for goods ordered
erroneously debited to Accounts payable
Adjusted balance
P
2. C Accrued expenses per book
Accrued expenses erroneously included in
Accounts payable
Various accruals (
Adjusted accrued expenses
P 63,100
)
P
Situation 8 – DOMINICA CORPORATION
Reported net income
a. 2022 ending inventory understated
2023 ending inventory overstated
b. 2024 purchase recorded in 2023
c. Unrecorded sales on account:
2021
2022
2023
d. Unrecorded accrued salaries:
2021
2022
e. Stock dividend charged to expense
f. Insurance premium expensed
g. Deferred gain on bond retirement
Amortization of deferred gain
Adjusted net income
1. C
2. D
2021
2022
2023
P127,000
----
P150,000
P128,500
----
-------P121,000
3. A
4. A
5. B Retained earnings
Share premium
Miscellaneous expenses
16,000
-----P179,000
3,000
13,000
---END---
Page 4 of 4 Pages
P129,600