Beruflich Dokumente
Kultur Dokumente
PROBLEM NO. 1
You are engaged in the regular annual examination of the accounts and records of PRTC Manufacturing Co. for the
year ended December 31, 2012. To reduce the workload at year end, the company, upon your recommendation,
took its annual physical inventory on November 30, 2012. You observed the taking of the inventory and made
tests of the inventory count and the inventory records.
The companys inventory account, which includes raw materials and work-in-process is on perpetual basis.
Inventories are valued at cost, first-in, first-out method. There is no finished goods inventory.
The companys physical inventory revealed that the book inventory of P1,695,960 was understated by P84,000.
To avoid delay in completing its monthly financial statements, the company decided not to adjust the book
inventory until year-end except for obsolete inventory items.
Your examination disclosed the following information regarding the November 30 inventory:
a. Pricing tests showed that the physical inventory was overstated by P61,600.
b.
An understatement of the physical inventory by P4,200 due to errors in footings and extensions.
c.
Direct labor included in the inventory amounted to P280,000. Overhead was included at the rate of 200% of
direct labor. You have ascertained that the amount of direct labor was correct and that the overhead rate
was proper.
d.
The physical inventory included obsolete materials with a total cost of P7,000. During December, the
obsolete materials were written off by a charge to cost of sales.
Your audit also disclosed the following information about the December 31 inventory:
a.
b.
QUESTIONS:
Based on the above and the result of your audit, determine the following:
1.
2.
3.
Cost of materials on hand, and materials included in work in process as of December 31, 2012
a. P819,560
c. P728,560
b. P812,560
d. P942,760
4.
The amount of direct labor included in work in process as of December 31, 2012
a. P618,800
c. P338,800
b. P232,400
d. P386,400
5.
The amount of factory overhead included in work in process as of December 31, 2012
a. P 772,800
c. P464,800
b. P1,237,600
d. P777,600
PROBLEM NO. 2
PRTC Company's property, plant, and equipment, accumulated depreciation, and amortization balances at
December 31, 2011 are:
Land
Buildings
Machinery and equipment
Automobile and trucks
Leasehold improvements
Totals
Cost
P 275,000
2,800,000
1,380,000
210,000
432,000
P5,097,000
Accumulated
depreciation
P 672,900
367,500
114,326
108,000
P1,262,726
Asset
Buildings
Machinery and equipment
Automobile and trucks
(all acquired after 2009)
Leasehold improvements
Depreciation
method
150%-decliningbalance
straight-line
150%-decliningbalance
straight-line
Useful life
25 years.
10 years
5 years
On January 6, 2012, PRTC completed its self-construction of a building on its own land. Direct costs of
construction were P1,095,000. Construction of the building required 15,000 direct labor hours. PRTC's
construction department has an overhead allocation system for outside jobs based on an activity
denominator of 100,000 direct labor hours, budgeted fixed costs of P2,500,000, and budgeted variable costs
of P27 per direct labor hour.
On July 1, 2012, machinery and equipment were purchased at a total invoice cost of P325,000. Additional
costs of P23,000 to rectify damage on delivery and P18,000 for concrete embedding of machinery were
incurred. A wall had to be demolished to enable a large machine to be moved into the plant. The wall
demolition cost P7,000, and rebuilding of the wall cost P19,000.
On September 30, 2012, a truck with a cost of P48,000 and a carrying amount of P30,000 on December 31,
2011 was sold for P23,500.
On November 4, 2012, PRTC purchased a tract of land for investment purposes for P700,000. PRTC thinks it
might use the land as a potential future building site.
On December 20, 2012, a machine with a cost of P17,000, a carrying amount of P2,975 on date of disposition,
and a market value of P4,000 was sold to a corporate officer.
QUESTIONS:
Based on the above and the result of your audit, compute for the following as of and for the year ended
December 31, 2012:
6.
7.
Total depreciation
a. P460,228
b. P462,678
Carrying amount of buildings
a. P3,409,474
b. P3,761,974
c. P470,528
d. P461,528
c. P3,028,774
d. P3,381,274
8.
9.
c. P61,722
d. P52,722
QUESTIONS:
Based on the above and the result of your audit, determine the following: (Round off present value factors to 4
decimal places)
11. Total expenses related to franchise in 2012
a. P503,914
b. P535,200
c. P448,950
d. P454,964
P350,000
P175,250
15,000
190,250
540,250
246,750
P293,500
At December 31, 2012, the bank statement and general ledger showed balances of P350,000 and P293,500,
respectively.
The cut-off bank statement showed a bank charge on January 2, 2013 for P30,000 representing correction of
an erroneous bank credit.
On December 31, 2012, the company received and recorded customers postdated check amounting to
P50,000.
QUESTIONS:
Based on the above and the result of your audit, answer the following:
16. The adjusted deposit in transit as at December 31, 2012 is
a. P175,250
c. P225,250
b. P125,250
d. P125,000
17. The adjusted outstanding checks as at December 31, 2012 is
a. P298,710
c. P209,540
b. P232,000
d. P194,790
18. The adjusted cash to be presented in the statement of financial position at December 31, 2012 is
a. P235,460
c. P265,460
b. P250,460
d. P310,460
19. The cash shortage as of December 31, 2012 is
a. P45,000
c. P60,000
b. P58,040
d. P 8,040
20. The net adjustment to the cash account as of December 31, 2012 is
a. P43,040
c. P58,040
b. P60,000
d. P45,000
PROBLEM NO. 5
On January 1, 2012, PRTC Company sold land that originally cost P400,000 to Buyer Company. As payment, Buyer
gave PRTC Company a P600,000 note. The note bears an interest rate of 4% and is to be repaid in three annual
installments of P200,000 (plus interest on the outstanding balance). The first payment is due on December 31,
2012. The market price of the land is not reliably determinable. The prevailing rate of interest for notes of this
type is 14% on January 1, 2012 and 15% on December 31, 2012.
PRTC made the following journal entries in relation to the sale of land and the related note receivable:
January 1, 2012
Notes receivable
Land
Gain on sale of land
P600,000
P400,000
200,000
P224,000
P200,000
24,000
PRTC reported the notes receivable in its statement of financial position at December 31, 2012 as part of trade
and other receivables.
QUESTIONS:
Based on the above and the result of your audit, answer the following:
21. The correct gain on sale of land is
a. P103,105
b. P 94,868
c. P120,061
d. P200,000
c. P54,902
d. P
0
On 1 January 2012 the entity acquired 25 per cent of the equity of each of entities B, C and D for P10 million,
P15 million and P28 million respectively. Transaction costs of 1 per cent of the purchase price of the shares
were incurred by the entity.
b) On 2 January 2012 entity B declared and paid dividends of P1 million for the year ended 2011.
c)
On 31 December 2012 entity C declared a dividend of P8 million for the year ended 2012. The dividend
declared by entity C was paid in 2013.
d) For the year ended 31 December 2012, entities B and C recognized profit of respectively P5 million and P18
million. However, entity D recognized a loss of P20 million for that year.
e) Published price quotations do not exist for the shares of entities B, C and D. Using appropriate valuation
techniques the entity determined the fair value of its investments in entities B, C and D at 31 December 2012
as P13 million, P29 million and P15 million respectively. Costs to sell are estimated at 5 per cent of the fair
value of the investments.
f)
The entity has no subsidiaries and therefore does not produce consolidated financial statements.
In accordance with section 14.4 of the PFRS for SMEs, an investor shall account for all of its investments in
associates using one of the following: (a) the cost model in paragraph 14.5, (b) the equity method in paragraph
14.8, or (c) the fair value model in paragraph 14.9. The entity is seeking your advice on the effect of each method
on the carrying amount of the investment and its effect on profit or loss.
QUESTIONS:
Based on the above and the result of your audit, answer the following as of and for the year ended December 31,
2012:
26. If the entity measures its investments in associates using the cost model, the total carrying amount of the
investments should be
a. P40.25 million
c. P39.25 million
b. P53.28 million
d. P39.50 million
27. If the entity measures its investments in associates using the cost model, the net amount to be recognized in
profit or loss should be
a. P(11.78) million
c. P(11.03) million
b. P(12.03) million
d. P 2.25 million
28. If the entity measures its investments in associates using the equity method, the total carrying amount of the
investments should be
a. P52.03 million
c. P42.75 million
b. P43.00 million
d. P43.75 million
29. If the entity measures its investments in associates using the equity method, the net amount to be recognized
in profit or loss should be
a. P(8.28) million
c. P(7.53) million
b. P(8.53) million
d. P0.75 million
30. If the entity measures its investments in associates using the fair value model, the net amount to be
recognized in profit or loss should be
a. P5.72 million
c. P2.87 million
b. P5.47 million
d. P4.00 million
PROBLEM NO. 7
PRTC Corporation is selling audio and video appliances. The companys fiscal year ends on March 31. The
following information relates to the obligations of the company as of March 31, 2012:
Notes payable
PRTC has signed several notes with financial institutions. The maturities of these notes are given below. The total
unpaid interest for all of these notes amounts to P340,000 on March 31, 2012.
Due date
April 31, 2012
July 31, 2012
February 1, 2013
April 30, 2013
June 30, 2013
Amount
P 700,000
900,000
800,000
1,200,000
1,500,000
P 5,100,000
Estimated warranties
PRTC has a one-year product warranty on some selected items. The estimated warranty liability on sales made
during the 2010 2011 fiscal year and still outstanding as of March 31, 2011, amounted to P252,000. The
warranty costs on sales made from April 1, 2011 to March 31, 2012, are estimated at P630,000. The actual
warranty costs incurred during 2011 2012 fiscal year are as follows:
Warranty claims honored on
2010 2011 sales
Warranty claims honored on
2011 2012 sales
Total
P 252,000
285,000
P 537,000
Trade payables
Accounts payable for supplies, goods, and services purchases on open account amount to P560,000 as of March
31, 2012.
Dividends
On March 10, 2012, PRTCs board of directors declared a cash dividend of P0.30 per ordinary share and a 10%
ordinary share dividend. Both dividends were to be distributed on April 5, 2012 to ordinary shareholders on
record at the close of business on March 31, 2012. As of March 31, 2012, PRTC has 5 million, P2 par value,
ordinary shares issued and outstanding.
Bonds payable
PRTC issued P5,000,000, 12% bonds, on October 1, 2006 at 96. The bonds will mature on October 1, 2016.
Interest is paid semi-annually on October 1 and April 1. PRTC uses the straight line method to amortize bond
discount.
QUESTIONS:
Based on the foregoing information, determine the adjusted balances of the following as of March 31, 2012:
31. Estimated warranty payable
a. P252,000
b. P345,000
c. P630,000
d. P882,000
c. P200,000
d. P 90,000
c. P150,000
d. P250,000
c. P5,445,000
d. P3,945,000
c. P7,590,000
d. P7,610,000
PROBLEM NO. 8
The shareholders equity section of the PRTC Corporations statement of financial position as of December 31,
2011 is presented below:
12% Preference share capital, P100 par
Ordinary share capital, P20 par
Share premium preference
Share premium ordinary
Share premium treasury shares
P 270,000
1,598,400
36,800
235,200
3,200
Retained earnings
1,585,840
P3,729,440
July 1
Jul. 31
Aug. 30
Dec. 31
2012
Feb. 1
May 1
May 31
2012
Sep. 1
Oct. 1
Nov. 1
Dec. 31
QUESTIONS:
Determine the amounts, as required, in PRTC Corporations comparative financial statements as of and for the
years ended December 31, 2011 and 2012.
36. Dividends paid to ordinary shareholders in 2012
a. P652,690
c. P652,960
b. P692,560
d. P656,960
37. Retained earnings as of December 31, 2012
a. P1,880,800
c. P1,892,000
b. P1,884,800
d. P1,888,000
38. Total equity as of December 31, 2012
a. P4,175,200
b. P4,171,200
c. P4,182,400
d. P4,157,200
c. P 8.56
d. P18.49
c. P5.86
d. P5.81
PROBLEM NO. 9
PRTC Corporation, a nonpublic entity, was incorporated on December 1, 2011, and began operations one week
late closing the books for the fiscal year ended November 30, 2012, the controller prepared the following financial
statements:
PRTC Corporation
Statement of Financial Position
November 30, 2012
Assets
Current assets:
Cash
Marketable securities , at cost
Accounts receivable
Allowance for doubtful accounts
Inventories
Prepaid insurance
Total current assets
Property, plant and equipment
Less accumulated depreciation
Property, plant and equipment, net
Research and development costs
Total assets
P 150,000
60,000
450,000
( 59,000)
430,000
__15,000
1,046,000
426,000
( 40,000)
386,000
120,000
P1,552,000
P 592,000
224,000
816,000
400,000
336,000
736,000
P1,552,000
PRTC Corporation
Statement of Income
For the Fiscal Year Ended November 30, 2012
Net sales
Operating expenses:
Cost of sales
Selling and administrative
Depreciation
Research and development
Income before income taxes
Provision for income taxes
Net income
P2,950,000
1,670,000
650,000
40,000
30,000
2,390,000
560,000
224 000
P 336,000
PRTC is in the process of negotiating a loan for expansion purposes, and the bank has requested audited financial
statements. During the course of the audit, the following additional information was obtained:
a.
The investment portfolio consists of short-term investments in marketable equity securities with a total
market valuation of P55,000 as of November 30, 2012.
b.
Based on an aging of the accounts receivable as of November 30, 2012, it was estimated that P36,000 of the
receivables will be uncollectible.
c.
Inventories at November 30, 2012 did not include work in process inventory costing P12,000, sent to an
outside processor on November 29, 2012.
d.
A P3,000 insurance premium paid on November 30, 2012 on a policy expiring one year later was charged to
insurance expense.
e.
PRTC adopted a pension plan on June 1, 2012 for eligible employees to be administered by a trustee. Based
upon actuarial computations, the first twelve months' normal pension was estimated at P45,000.
f.
On June 1, 2012, a production machine purchased for P24,000 was charged to repairs and maintenance.
PRTC depreciates machines of this type on the straight-line method over a five-year life with no salvage value,
for financial and tax purposes.
g.
Research and development costs of P150,000 were incurred the development of a patent, which PRTC
expects to be granted during the fiscal year ending November 30, 2013. PRTC initiated a five-year
amortization of the P150,000 total cost during the fiscal year ended November 30, 2012.
h.
During December 2012, a competitor company filed suit against PRTC for patent infringement claiming
P200,000 damages. PRTC's legal counsel believes that an unfavorable outcome is probable. A reasonable
estimate of the court's award to the plaintiff is P50,000.
i.
The 40% effective tax rate was determined to be appropriate for calculating the provision for income taxes
for the fiscal year ended November 30, 2012. Ignore computation of the deferred portion of income taxes.
QUESTIONS:
Based on the above and the result of your audit, determine the following as of and for the fiscal period ended
November 30, 2012:
41. Net income
a. P253,260
b. P283,260
c. P235,260
d. P239,760
c. P1,079,000
d. P1,073,000
c. P1,489,200
d. P1,491,600
c. P855,840
d. P805,840
c. P639,760
d. P653,260
PROBLEM NO. 10
PRTC, Inc., a nonpublic enterprise, is negotiating a loan for expansion purposes and the bank requires audited
financial statements. Before closing the accounting records for the year ended December 31, 2012, PRTC's
controller prepared the following comparative financial statements for 2012 and 2011:
PRTC, Inc.
Statements of Financial Position
December 31, 2012 and 2011
2012
2011
Assets
Cash
Trading securities
Accounts receivable
Allow. for doubtful accounts
Inventories
Property and equipment
Accumulated depreciation
Total assets
P 275,000
78,000
487,000
(50,000)
425,000
310,000
(150,000)
P1,375,000
P150,000
78,000
392,000
(32,000)
307,000
217,000
(121,000)
P 991,000
P 420,000
100,000
260,000
130,000
465,000
P1,375,000
P347,000
260,000
130,000
254,000
P 991,000
Net sales
Operating expenses:
Cost of sales
Selling and admin.
Depreciation
Est. loss from lawsuit
Profit
PRTC, Inc.
Income Statements
For the Years Ended December 31, 2012 and 2011
2012
2011
P1,580,000
P1,250,000
P 755,000
485,000
29,000
100,000
P1,369,000
P 211,000
P 690,000
365,000
18,000
P1,073,000
P 177,000
During the course of the audit, the following additional information was obtained:
a.
The trading securities were acquired on December 31, 2011. The securities have a fair value of P67,000 at
December 31, 2012.
b.
In discussion with the company officials, it was determined that the doubtful accounts expense rate based on
net sales should be reduced to 2% from 3%, effective January 1, 2012.
c.
As a result of errors in the physical count, inventories were overstated by P12,000 at December 31, 2011 and
by P17,500 at December 31, 2012.
d.
On January 1, 2011, the cost of equipment purchased for P30,000 was debited to repairs and maintenance.
PRTC depreciates equipment of this type by the straight-line method over a five-year life with no residual
value.
On July 1, 2012, fully depreciated equipment purchased for P21,000, was sold as scrap for P2,500. The only
entry PRTC made was to debit cash and credit property and equipment for the scrap proceeds. The property
and equipment (net) had a current cost of P250,000 at December 31, 2012.
e.
f.
Advertising and promotion expense for the year ended December 31, 2011 includes the P25,000 cost of
printing sales catalogs for a special promotional campaign held in January 2012.
g.
PRTC was named as a defendant in a lawsuit in October 2012. PRTC's counsel is of the opinion that PRTC has
a good defense, and does not anticipate any impairment of PRTC's assets or that any significant liability will
be incurred. Nevertheless, PRTCs management wished to be conservative and, therefore, established a loss
contingency of P100,000 at December 31, 2012.
QUESTIONS:
Based on the above and the result of your audit, compute for the following: (Disregard income taxes)
46. Adjusted retained earnings as of January 1, 2012
a. P266,000
c. P285,000
b. P297,000
d. P291,000
47. Adjusted profit for the year ended December 31, 2012
a. P281,800
c. P287,800
b. P181,800
d. P306,800
48. Adjusted current assets as of December 31, 2012
a. P1,226,760
c. P1,154,900
b. P1,190,300
d. P1,202,300
49. Adjusted carrying amount of property and equipment as of December 31, 2012
a. P168,500
c. P178,000
b. P180,500
d. P192,500
50. Adjusted shareholders equity as of December 31, 2012
a. P962,800
c. P974,800
b. P950,800
d. P862,800