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In an audit of SEXY LOVE Company for the year ended December 3 2014, the entity
took its annual physical inventory on November 30, 2014. The entity's inventory which
includes raw materials and work in process is on a perpetual basis and FIFO pricing is
used. There are no finished goods.
The physical inventory on November 30, 2014 revealed that the book inventory
of P2,913,500 was understated by P150,000. To avoid distorting the interim
financial statements, the entity decided not to adjust the book inventory until
year-end.
A special order started and completed December has excessive scrap loss of
P40,000 which was charged to manufacturing overhead expense.
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d) P977,500
4. What is the amount of direct labor included in the December 31 inventory?
a) P1,190,000
b) P1,105,000
c) P415,000
d) P585,000
5. What is the correct inventory on December 31?
a) P2,477,500
b) P3,027,500
c) P2,505,000
d) P2,987,500
In connection with your audit of the financial statements of Dissa Ex Corporation, you
were provided with the following statement of financial position as of December 31, 2014:
Dissa Ex Corporation
Statement of Financial Position
December 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash P Accounts payable P 68,000
250,000
Financial assets at fair
value through P & L 160,000 Other current 40,000
liabilities
Accounts receivable, 427,000 Total P 108,000
net
Inventory 620,000
Other current assets Long-term liabilities 655,000
284,000
Total P Total liabilities P 763,000
1,741,000
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Total Assets P Total liabilities and P 3,399,000
3,399,000 equity
The following additional information relates to the December 31, 2014, statement of
financial position.
a) Cash includes P80,000 that has been restricted for the purchase of manufacturing
equipment ( a noncurrent asset).
b) Financial assets at fair value include P65,000 of stock that was purchased in order
to give the company significant ownership and a seat on the board of directors of
a major supplier.
c) Other current assets include a P90,000 advance to the president of the company.
No due date has been set.
e) Long-term liabilities also include a P140,000 bank loan. On May 15, 2015, the loan
will become due on demand.
g) Cash in the amount of P380,000 has been placed in a restricted fund for the
redemption of preference shares in 2016. Both the cash and the shares have been
removed from the statement of financial position.
h) Property, plant and equipment includes land costing P160,000 that is being held
for investment purposes and that is scheduled to be sold in 2015.
Based on the result of your audit, determine the adjusted amounts of the following
as of December 31, 2014:
6. Total current assets
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a) P1,526,000 c) P1,821,000
b) P1,686,000
d) P1,666,000
7. Total noncurrent assets
a) P2,163,000 c) P2,023,000
b) P2,003,000 d) P2,083,000
8. Total current liabilities
a) P548,000 c) P608,000
b) P458,000 d) P598,000
e)
9. Total noncurrent liabilities
a) P515,000 c) P455,000
b) P605,000 d) P465,000
b) P2,626,000 d) P2,716,000
PROBLEM 5
Jerome Ice Co. started operations on October 1, 2010. Its accounts at June 30, 2013
included the following balances:
Machinery (at cost) P 196,000
Accumulated depreciation – machinery 95,772
Vehicles (at cost; purchased February 20, 2011) 320,000
Accumulated depreciation – vehicles 178,880
Land (at cost; purchased March 20, 2013) 150,000
Building (at cost; purchased March 20, 2013) 581,200
Accumulated depreciation – building 6,840
Land improvements (at cost; purchased March 20, 2013) 36,000
Accumulated depreciation – land improvements 600
Additional information:
Jerome calculates depreciation to the nearest month and balances the records at
month-end. Recorded amounts are rounded to the nearest peso, and the
reporting date is June 30.
Jerome uses straight line depreciation for all depreciable assets except vehicles,
which are depreciated on the diminishing balance at 30% p.a.
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The vehicles account balance reflects the total paid for four identical delivery
vehicles, which cost P80,000 each.
On acquiring the land and building, Jerome estimated the building's useful life
and residual value at 20 years and P34,000 respectively.
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a) P118,781
b) 125,216
c) 111,281
d) 113,489
14. Gain on trade in of machine no. 3 on September 20, 2014
a) P2,333
b) P23,667
c) P7,667
d) P0
15. Total depreciation expense on all depreciable assets for the year ended June 30,
2015
a) P98,951
b) 109,451
c) 106,551
d) 82,951
End of examination
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