Beruflich Dokumente
Kultur Dokumente
PROBLEM NO. 1
1. Eng-eng company has is a manufacturer and a retailer of household furnitures. Your audit of
the companys financial statements for the year ended dec 31 2013, discloses the following
debt obligations of the company at the end of its reporting period. Eng-engs financial
statements are authorized for issuance on march 6 2014
1. Eng-eng company has the following three loans payable scheduled to be repaid on
april of the next year
a. The company intends to repay loan for 100,000 when it comes due in april. In the
following oct, the company intends to get a new loan for 150,000 from the same
bank
b. The company intends to refinance loan 2 for 300,000 when it comes due in april.
The refinancing agreement will be signed in aprril
c. The company intends to refinance loan 3 for 500,000 before it comes due in
april. The actual refinancing took place in January
2. A 250,000 short-tem obligation due on march 1 2014, its maturity could be extended
to march 1 2016, provided eng-eng agrees to provide additional collateral. On
February 12 2014, an agreement is reached to extend the loans maturity to marh 1
2016
3. A short-term obligation of 3,600,000 in the form of notes payable due feb 5 2014.
The company issued 75,000 ordinary shares for P36 per share on January 25 2014.
The proceeds from the issuance plus 900,000 cash, were issued to fully settle the
debt on feb 5 2014
4. A long term obligation of 2,500,000 due on dec 1 2018. On nov 10 2013, eng-eng
breaches the covenant on its debt obligation and the loan becomes payable on
demand. An agreement is reached to provide a waiver of the breached on dec 11
2013
5. A long term obligation of 4,000,000. The loan is maturing over 4-years in the amount
of 1,000,000 per year. The loan is dated sept 1 2013, and the first maturity date is
sept 1 2014
6. A debt obligation of 700,000 maturing on dec 31 2016. The debt os callable on
demand by the lender at any time
1. What amount of current liabilities should be reported on the dec 31 2013 statement of
financial position?
a. 6,450,000
b.9,450,000
c.8,950,000
d.5,950,000
2. What amount of noncurrent liabilities should be reported on dec 31 2013 statement of
financial position
a. 3,000,000
b. 5,500,000
c.2,500,000
d. 6,000,000
PROBLEM NO 2
In connection with the audit of tiki-tiki company for the year ended dec 31 2013, you are called upon
to verify the accounts payable transaction. You find that the company does not make use of a voucher
register but enters all merchandise purchases in a purchase journal, from shich postings are made to
a subsidiary accounts payable ledger. The subsidiary ledger balance of 1,500,000 as of dec 31 2013
agrees with the accounts payable on the companys general ledger. The analysis of the accounts
discloses the following:
Trade creditors, credit balances
1,363,000
Trade creditors, debit balances
63,000
Net
1,300,000
3/3/11
6/10/12
7/10/13
10/10/13
12/05/13
12/5/13
item
Miscellaneous debit balances prior to 2009
No information available due to loss of
Record on fire
manila co- merchandise return for credit
But the company is now out of business
cebu corp merchandise returned, but cebu
Says never received
jolo distrubutors allowance granted on
Defective merchandise after the invoice
Was paid
bulacan co overpayment of invoice
12,000
advances to zambales co. this company agrees
to supply certain articles on a cost-plus basis 24,000
goods returned for credit and adjustment
on price after the invoices were paid; credit
memos from suppliers not yet received
amount
3,000
8,000
7,000
5,000
4,000
63,000
Your next step to check the invoices in both the paid and the unpaid invoices files against ledger
accounts. In this connection, you discover an invoice from atlas co of 45,000 dated dec 12 2013
marked duplicate which was entered in the purchases journal in jan 2014 . upon inquiry, you discover
that the merchandise covered by this invoice was received and sold but that the original invoice
apparently has not been received
In the bank reconciliation papers, there is a notation that five checks totaling 63,000 were prepared
and entered in the cash disbursement journal of dec but there checks were not used until jan 10 2014
The inventory analysis summary discloses goods in transit of 5,000 at dec 31 2013 not taken up by
the company under audit during year 2013. These goods are included in your adjusted inventory.
1. The accounts payable trade balance at dec 31 2013 should be
a. 1,471,000
b. 1,614,000
c. 1,214,000
d. 1,477,000
2. The net adjustment to purchases should include a
a. net debit of 51,000
b. net credit of 41,000
c. net debit of 10,000
d. net debit of 73,000
3. the entry to adjust the accounts payable account for those accounts with debit balances
should include a debit to miscellaneous losses of
a.18,000
b.23,000
c.35,000
d.39,000
4. the entry to adjust accounts payable account for those accounts with debit balace should
include a debit to
a. miscellaneous losses of 23,000
b. advances to suppliers of 24,000
1. How much was received by feel na feel from the bonds issued on july 1 2011?
a. 8,852,960
b. 10,000,000 c.10,500,000
d.10,647,040
2. On march 31 2013, feel na feel statement of financial position would report total current
liabilities of
a. 5,286,000
b. 4,386,000
c. 5,336,000
d. 5,642,000
3. On march 31 2013 feen na feel statement of financial position would report a total
noncurrent liabilities of
a. 14,389,350 b. 14,352,217 c. 14,370,783 d. 14,252,960
PROBLEM NO. 4
On January 1 2012 wizards corporation issued 2,000 of its 5-year 1,000 face value, 11% bonds dated
bonds dated January 1 at an effective annual interest rate (yield) 9%. Interest is payable each dec 31
wizards uses the effective interest method of amortization. On dec 31 2013 the 2,000 bonds were
extinguished early through acquisition in the open market by wizards for 1,980,000 plus accrued
interest
On july 1 2012 wizard issued 5,000 of its 6-year ,1,000 face value, 10% convertible bonds at par.
Interest is payable every june 30 and dec 31. On the date of issue, the prevailing market interest rate
to similar debt without the conversion option is 12%. On july 1, 2013 an investor in wizards convertible
bonds tendered 1,500 bonds for conversion into 15,000 shares of wizards ordinary shares, which had
a fair value of 105 and a par value of 1 at the date of conversion.
1. The issue price of 2,000 5-year, P1,000 face value bonds on jan 1 2012 is
a. 2,155,560
b.2,000,000
c.1,844,400
d.2,147,800
2. Carrying value of the 2,000 5-year, P1,000 face value bonds on dec 31 2012 is.
a. 1,898,400
b. 2,129,500
c.2,000,000
d. 2,121,100
3. The gain on early retirement of bonds on dec 31 2013 is
a. 20,000
b.112,000
c.121,200
d. -0-
4. The carrying value of the 5,000 6-year,P1,000 face value bonds on dec 31 2012 is
a. 4,605,800
b.5,000,000
c. 4,732,875
d. 4,615,400
5. The conversion of the 1,500 6-year, 1,000 face value bonds on july 1 2013 will increase
share premium by
a. 1,485,000
b. 1,374,600
c.1,415,054
d. 1,377,697
PROBLEM NO 5
The following data were obtained from the initial audit of BIBI company
15%, 10year, bonds payable dated January 1 2012
Debit
credit
balance
Cash proceeds from issue on jan 1 2012
of 1,000, P1,000 bonds. The market rate
of interest on the date of issue was 12%
1,172,044
1,172,044
*bond interest expense
Cash paid 1/2/13
75,000
75,000
Cash paid
75,000
75,000
Accrual 12/31/13
75,000
225,000
*accrued interest on bonds
Balance
75,000
75,000
Accrual
75,000
150,000
*treasury bonds
Redemption price and interest to date
on 200 bonds permanently retired
on 12/31/13
265,000
265,000
based on the preceding information, determine the following:
1. Carrying value of bonds payable at dec 31 2013
a. 831,110
b. 800,000
c. 15,000
d.921,266
2. Loss on bond redemption
a.4,683
b.19,683
c. 15,000
d. 34,683
3. accrued interest on bonds at dec 31 2013
a.75,000
b. 135,000
c. 60,000
d. 52,500
4. bond interest expense for the year ended dec 31 2013
a. 150,000
b. 139,174
c. 69,745
d. 160,826
THEORY
Select the best answer for each of the following
1. In auditing accounts payable, an auditors procedures most likely will focus primarily on
managements assertion of
a. Existence
c. completeness
b. Presentation and disclosure
d. valuation and allocation
2. An auditor performs a test to determine whether all merchandise for which the client was
billed was received. The population for this test consist of all
a. Merchandise received
3.
4.
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b. Vendors invoices
c. Canceled checks
d. Receiving reports
The primary audit test to determine if accounts payable ate valued properly is
a. Confirmation of accounts payable
b. Vouching accounts payable to supporting documents
c. An analytical procedure
d. Verification that accounts payable was reported as a current liability in the balance sheet
Which of the following procedures is least likely to be performed before the balance sheet
date
a. Observation of inventory count
b. Testing of internal control over cash
c. Search of unrecorded liabilities
d. Confirmation of receivables
The audit assistant found a purchase order for a regular supplier in the amount of 5,500. The
purchases order was dated after receipt of goods. The purchasing agent had forgotten to
issue the purchase order. Also, a disbursement of 450 for materials did not have a receiving
report. The assistant wanted to select additional purchase orders for investigation but was
unconcerned about lack of receiving report. The audit director should
a. Agree with the assistant because the amount of purchases order exception was
considerably larger than the receiving report exception
b. Agree with the assistant because the cash disbursement clerk had been assured by the
receiving clerk that the failure to fill out a report didnt happen very often
c. Disagree with the assistant because two problems have an equal risk of loss associated
with them
d. Disagree with the assistant because the lack of a receiving report has a greater risk of
loss associated with it.
When using confirmation to provide evidence about completeness assertion for accounts
payable, the appropriate population most likely is
a. vendors with whom the entity has previously dine business
b. amounts recorded in the accounts payable subsidiary ledger
c. payees of checks drawn in the month after the year end
d. invoices filed in the entities open invoice file
which of the following is a substantive test that an auditor is most likely to perform to verify
the existence and valuation of recorded accounts payable
a. Investigating the open purchase order file to ascertain that pre-numbered purchase orders
are used and accounted for.
b. Receiving the clients mail, unopened , for a reasonable period of time after year end to
search for unrecorded vendors invoices
c. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders
and receiving reports.
d. Confirming accounts payable account balances with known supplies who have zero
balances
Only one of the four statements which compare confirmation of accounts payable with
suppliers and confirmation of accounts receivable with debtors is false. The false statement
is that
a. Confirmation of accounts receivable with debtors is more widely accepted auditing
procedure than is confirmation of accounts payable with suppliers.
b. Statistical sampling techniques are more widely accepted in the confirmation of
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