CASE 1:

The “CASH” account of TUBA Corporation’s ledger on December 31, Year1 showed the
following:

Petty cash fund (including P7,500 unreplenished

voucher of which P2,400 is dated January 3, Year2) P 15,000
Redemption Fund Account – PNB 500,000
Traveler’s check 100,000
Money order 10,000
Treasury bill, purchased December 1, Year1 (due on Feb. 1, Year2) 50,000
Time deposit due on March 31, Year2 50,000
180-day Treasury bill, due March 15, Year2 120,000
Note receivable in the possession of a collecting agency 20,000
PNB – Checking Account #211-009-091 325,900
Cash on hand, including customer postdated check of P15,000 23,000
Savings deposit, earmarked for acquisition of equipment 210,000
A check payable to San Ignacio Incorporated, dated January 5, Year2,
that was included in the December 31 PNB Checking Account
#211-009-091 50,000
Bond Sinking Fund (used to finance the maturing long-term obligation
on March 31, Year2)
150,000
Overdraft in PNB Checking Account #211-099-085 ( 50,000)
Check #801 in payment to Accounts Payable, dated Dec. 31, Year1
not mailed until January 5, Year2 20,000
Advances to Officers/Employees for Seminars (no liquidation is
required) 80,000
Money market placement (due June 30, Year2) 600,000
Listed stock held as temporary investment 100,000
Check #789 in payment to Suppliers, dated January 5, Year2 and
recorded December 31, Year1. 35,000
Customers’ certified checks 10,000
Pension Fund 150,000

The adjusted cash and cash equivalents balance at December 31, Year1 is:
a. P 623,800
b. P 673,800
c. P 618,800
d. P 723,800

CASE 2:
Your audit of BAGUIO Corp.’s cash in bank account revealed the following information:
 The unadjusted balance per bank statement on November 30 was at 435,600.
 The unadjusted balance per books on December 31 was at 789,200.
 November bank credits included a customer note collected by the bank at 138,000
and a 75,000 deposit of Baguo Corp erroneously credited by the bank to the
corporation’s account.
 November bank debits included a 9,000 bank service charge and a 25,000
customer check returned by the bank marked “NSF”.
  November deposit in transit was at 125,000 while outstanding checks was at
90,000, which included a 10,000 check certified by the bank at the request of the
corporation.
 A 52,000 check collection from a customer was recorded by the corporation as
25,000 in November.
 All reconciling items in the month of November were recorded in the books in the
month of December.
 A 40,000 depositors note was charged by the bank in December along with a
12,000 December bank service charge.
 Among December bank credits was a 100,000 bank credit for loan proceeds from
the bank.
 A 32,000 check issued to a supplier was recorded by the company as 23,000 in
December.
 The bank statement for December showed total credits at 2,140,000 and total
debits at 1,890,000.
 The cash records for December showed total collections at 2,400,000 and total
disbursements at 1,900,000.

What is the correct cash balance as of November 30?

a. 395,600
b. 405,600
c. 420,200
d. 410,200

What is the total cash shortage/overage as of November 30?

a. 24,600
b. 14,600
c. 9,600
d. 4,600

What is the total deposit in transit as of December 31?

a. 220,000
b. 297,000
c. 320,000
d. 347,000

What is total outstanding checks as of December 31?

a. 192,000
b. 183,000
c. 42,000
d. 117,000

What is the correct cash balance as of December 31?

a. 813,600
b. 823,600
c. 828,200
d. 843,200

CASE 3:
You are auditing the receivable of LA TRINIDAD INC., a supplier of office and school
supplies in the Northern Luzon Region. Your investigation revealed the following general
ledger balances as of December 31, 2018 before any proposed audit adjustments:

Accounts Receivable 1,250,000

Allowance for Bad Debts (38,500)

The company provides for bad debt expense for interim reporting purposes using the
income statement approach. Bad debts expense is provided at 2%. Total sales for the
first three quarters, from which the interim provisions were made was at 4,500,000. During
the year, 56,000 of the receivables were written off, while 20,000 of previously written off
accounts were recovered.

The following aging of accounts receivable schedule was provided by the company
accountant:
1-15 days 420,000
16-30 days 240,000
31-60 days 210,000
61-90 days 250,000
More than 90 days 120,000
Of the more than 90 days accounts, 30,000 is deemed uncollectible thus has too be
further written off.

You sent confirmation letters to customers with significant account balances. The
following is a summary of the confirmation replies:
Customer Amount Customers’ Reply Audit Findings
Alpha 150,000 Our records show a The difference was due to merchandise
balance of 135,000 return made by the customer on
December 28. The goods were received
on January 2. The related credit memo
was issued and recorded by then. The
return was for goods originally delivered
and invoiced by the company on
October 12.
Beta 300,000 Our records show a The difference was due to an error
balance of 290,000 made by the company in preparing an
invoice dated November 20. The
invoice price used was at 200/unit
whereas the agreed price should have
been at 190/unit.
Charlie 190,000 Our records show a The payment made by Charlie for an
balance of 150,000 invoice dated October 20 was posted
erroneously to the subsidiary ledger of
Echo.
Delta 255,000 Our records show a The invoice for deliveries made on
balance of 250,000 December 3, was erroneously posted in
the subsidiary ledger at 55,000. The
correct invoice amount is 50,000.
 Echo 160,000 Our records show a All outstanding transactions with Echo
bigger balance were made on November.

The term of the sale is 5/15, n/30. Per the past experience of the company, 25% of the
customers normally take advantage of cash discounts. The following are deemed
appropriate % of uncollectible regarding accounts that are doubtful for collection:
16-30 days current 2
1-30 days past due 10
31-60 days past due 25
More than 60 days past due 50

What is the total unreconciled difference between the accounts receivable general ledger
and subsidiary ledger?
a. 5,000
b. 10,000
c. 15,000
d. none

What is the correct balance of accounts receivable before any valuation allowance?
a. 1,200,000
b. 1,195,000
c. 1,185,000
d. 1,180,000

What is the correct allowance for bad debt as as of year end?

a. 122,450
b. 122,550
c. 127,050
d. 126,050

What is the correct carrying amount of the accounts receivables as of year end?
a. 1,082,300
b. 1,087,550
c. 1,057,550
d. 1,052,300

What is the correct bad debt expense for the year?

a. 173,950
b. 203,950
c. 204,050
d. 174,050

CASE 4:
BENGUET Company use a period inventory system and a fiscal year ending June 30.
The company make all its merchandise purchases and sales on credit. The following
information is available from the company’s inventory records:
Beginning Inventory 400,000
Purchases 1,800,000
Sales 4,210,000
 Gross Profit based on Sales 40%
Ending Inventory, Per Physical Count 320,000
Accounts Receivable 660,000
Accounts Payable 525,000

The following transactions occurred near the end of the fiscal year:
 Goods costing 80,000 received on June 27 were recorded as purchases twice.
 Goods shipped by rail to a customer from Naga were recorded as sale on June 29
at 120,000. The goods were shipped on June 29, FOB Naga. The goods are still
in transit as of the fiscal year end.
 Goods were received on July 2 and ere recorded as purchase on the same date.
The supplier’s invoice indicates however that goods were shipped on June 28 and
that the invoice price of 72,000 appropriately included freight cost of 2,000 prepaid
by the supplier in behalf of Benguet.
 Goods costing 90,000 were recorded as purchase on July 5. A Legaspi city
supplier sipped the goods by rail, FOB Legaspi on June 30.
 Goods costing 120,000 held by Kabalen Company on consignment we’re not
counted. Benguet recorded the related sales when it shipped the goods to Kabalen
on June 23.
 Goods costing 76,000 were received on June 18 and returned for a credit on June
20 because they were not satisfactory. Benguet did not record yet these events.

What is the correct ending inventory balance?

a. 584,000
b. 602,000
c. 672,000
d. 674,000

What is the correct cost of sales for the fiscal year?

a. 1,608,000
b. 1,530,000
c. 1,532,000
d. 1,604,000

What is the adjusted ending balance of Accounts Receivable?

a. 660,000
b. 540,000
c. 420,000
d. 340,000

What is the adjusted ending balance of Accounts Payable?

a. 531,000
b. 529,000
c. 459,000
d. 607,000

What is the net adjustment to the income as a result of the audit?

a. 48,000 decrease
b. 30,000 increases
 c. 28,000 increase
d. 52,000 decrease

CASE 5:
In connection with your audit of the financial statements of Magiba Corporation for the
year ended December 31, Year1, you conducted a surprise count of the company’s petty
cash and undeposited collections at 9:10 am on January 3, Year2. You count disclosed
the following:

Bills and counts

Bills Coins
P100.00 5 pieces P1.00 205 pieces
50.00 40 pieces 0.50 162 pieces
20.00 35 pieces 0.25 32 pieces
10.00 27 pieces

Postage stamps (unused) - P365

Checks
Date Payee Maker Amount
Dec. 30 Cash Custodian P 1,200
Dec. 30 Magiba Corp. Karren, Inc. 14,000
Dec. 31 Magiba Corp Sheryl, sales manager 1,680
Dec. 31 Magiba Corp Victor Corp. 17,800
Dec. 31 Magiba Corp Ma. Karen, Inc. 8,300
Dec. 31 Merry Corp. Magiba Corp. 27,000
(not endorsed)

Unreimbursed vouchers
Date Payee Description Amount
Dec. 23 Sheryl, sales mgr. Advance for trip P 7,000
Dec. 28 Post Office Postage stamps 1,620
Dec. 29 Messengers Transportation 150
Dec. 29 Ace, Inc. Computer repair 800

Other items found inside the cash box:

 Unclaimed pay envelope of Jeanette. Indicated on the pay slip is his net salary of
P7,500. Your inquiry revealed that Jeanette’s salary is mingled with the petty cash
fund.
 The sales manager’s liquidation report for this Baguio Trip.

Cash Advance received on Dec. 23 P 7,000

Less: Hotel accomodation, meals, etc. P 4,500
Bus fare for two 400
Cash given to Carlo, salesman 300 5,200
Balance P 1,800
Accounted for as follows:
Cash returned by Carlo to the sales manager P 120
 Personal check of the sales manager 1,680
Total P 1,800

Additional information:
 The custodian is not authorized to cash checks.
 The last official receipt included in the deposit on December 30 is No. 4351 and
the last official receipt issued for the current year is No. 4355. The following official
receipts are all dated December 31, Year1.

OR No. Amount Form of Payment

4352 P 13,600 Cash
4353 17,800 Check
4354 3,600 Cash
4355 8,300 Check

 The petty cash balance per general ledger is P10,000. The last replenishment of
the fund was made on December 22, Year1.

MAGIBA CORPORATION’S cash shortage/overage at December 31, Year1 is:

a. P 61,166 short
b. P 34,166 over
c. P 20,166 short
d. P 22,514 over

The undeposited sales/collection of MAGIBA CORPORATION at December 31, Year1 is:

a. P 57,300
b. P 66,480
c. P 43,300
d. P 64,800

CASE 6:
Angel Corp, presented the following analysis of its investments in relation to your audit of
its investments for the period ended December 31, 2018:

Securities Securities Acquired Acquisition Cost Transaction Cost

Uno Shares 10,000 shares 150/share 5/share
Dos Shares 20,000 shares 70/share 2/share
Tres Shares 30,000 shares 120/share 10/share
10%, Kwatro Bonds 2,000,000 face value 12% yield rate

Audit notes:
 Uno shares were acquired on February 1 2018. Dividends of 5/share was received
on March 31, 2018. The said dividends were declared on December 30, 2017 to
stockholders as of February 20, 2018. Uno shares we’re selling at 160/share on
December 31, 2018.
 Dos shares were acquired on March 1, 2018.hald of the shares were sold on
august at 100 per share. A 10% stock dividend were received on Dos shares on
December 31, 2018 when its prevailing fair value was at 105 per share.
  Tres shares were acquired on April 14, 2018. A 20% share dividends were
received on Tres shares on August 1, 2018 when the prevailing fair value of shares
was at 132 per share. Half of the shares were sold on December 31, 2018 at their
prevailing fair value which was at 140 per share.
 Quatro bonds has a remaining term of 3 years from the date it was acquired at the
beginning of 2018. Interest on the bonds were collectible every December 31. The
prevailing effective rate on the bonds at year end is 8%.

Assuming that the securities are held at fair value through profit or loss, how much total
investments should be presented in the statement of financial position?
a. 5,275,000
b. 7,112,976
c. 7,207,397
d. 7,346,331

Assuming that the securities are held at fair value through profit or loss, how much total
unrealized gain or loss should be reported in the profit or loss?
a. 1,342,404
b. 1,392,404
c. 1,363,933
d. 1,423,123

Assuming that the securities are held at fair value through profit or loss, how much
realized gain or loss should be reported in profit or loss?
a. 720,000
b. 920,000
c. 570,000
d. 750,000

Assuming the securities are non-trading and that they are accounted at fair value through
other comprehensive income, how much unrealized gain or loss should be presented in
other comprehensive income/loss portion of the stockholder’s equity?
a. 1,005,000
b. 975,000
c. 945,000
d. 905,000

Assuming that the bonds is held to maturity, how much is the carrying value at year end?
a. 1,903,927
b. 1,932,398
c. 2,071,331
d. 2,103,084

CASE 7:
An analysis of incomplete records of Pure Corporation produced the following information
applicable to 2018:

ACCOUNT INCREASES
Cash 4,200,000
 Accounts Receivable 1,400,000
Accounts Payable 400,000
Prepaid Insurance 200,000

ACCOUNT DECREASES
Inventory 4,200,000
Equipment 1,400,000
Notes Receivable 400,000
Salaries Payable 200,000

Summary of cash transactions were as follows:

Cash Sales 3,000,000
Collections of Accounts Receivable 30,000,000
Collections on Notes Receivable 2,400,000
Interest on Notes Receivable 200,000
Returns and Allowances on Cash Purchases 500,000
Cash Purchases 1,000,000
Payments on Accounts Payable 16,500,000
Returns and Allowances on Cash Sales 400,000
Payment of Insurance 700,000
Payment of Salaries 10,000,000
Purchase of Equipment 800,000
Payment of Other Expenses 1,500,000
Payment of Dividends 1,000,000

Additional Information:
 Total purchase returns and allowances amounted to 800,000
 Total sale returns and allowances amounted to 1,200,000

Net Sales
a. 35,800,000
b. 36,200,000
c. 36,600,000
d. 37,000,000

Net Purchases
a. 17,900,000
b. 17,700,000
c. 17,400,000
d. 17,000,000

Cost of Sales
a. 18,000,000
b. 18,400,000
c. 18,700,000
d. 18,900,000

Depreciation Expense
a. 100,000
 b. 800,000
c. 900,000
d. 1,000,000

Net Income
a. 5,000,000
b. 5,150,000
c. 5,200,000
d. 5,900,000

CASE 8:
On December 15 of the current year, Precious, who owns Gift Corporation, asks you to
investigate the cash-handling activities in his firm. He thinks that an employee might be
stealing funds. “I have no proof” he say, “but I’m fairly certain that the November 30
undeposited receipts amounted to more than P6,000 although the November 30 bank
reconciliation prepared by the cashier shows only P3,619.20. Also, the November bank
reconciliation doesn’t show several checks that have been outstanding for a long time.
The cashier told me that these checks needn’t appear on the reconciliation because he
has notified the bank to stop payment on them and he had made the necessary payment
on the books.

At your request, Precious showed you the following November 30 bank reconciliation
prepared by the cashier.

Bal. Per bank statement P 2,360.12 Bal. Per Books P 5,385.22

Deposit in transit 3,619.20 Bank Service charge ( 30.00)
Outstanding checks Unrecorded bank CM ( 600.00)
# 2351 550.10
2353 289.16
2354 484.84 ( 1,224.10) ________
Adjusted Balance P 4,755.22 Adjusted Balance P 4,755.22

You discover that the P600 unrecorded bank credit represents a note collected by the
bank on Precious’s behalf. It appears in the deposits column of the November bank
statement. Your investigation also reveals that the October 31 bank reconciliation
showed three checks that had been outstanding longer than 10 months: No. 1432 for
P300, No. 1458 for P233.45, and No. 1512 for P126.55.

You also discover that these items were never added back into the cash account in the
books. In confirming that the checks shown on the cashier’s November 30 bank
reconciliation were outstanding on that date, you discover that check No. 2353 was
actually a payment of P829.16 and had been recorded on the books for the amount.

To confirm the amount of undeposited receipts at November 30, you request a bank
statement for December 1-12 (called a cut-off bank statement). This indeed shows a
December 1 deposit of P3,619.20.

The amount of fund stolen by the cashier is:

a. P 2,500
b. P 3,160
 c. P 580
d. P 1,840

The total outstanding checks of GIFT CORPORATION at November 30 is:

a. P 2,524.10
b. P 1,864.10
c. P1,224.10
d. P 1,884.10

CASE 9:
Wag Corp. has been using accrual basis of accounting. However, an examination of the
records revealed that some expenses and income have been handled on a cash basis
by the company. Net income as reported by the company were 1,450,000, 1,850,000,
and 2,050,000 for 2017, 2018, and 2019, respectively. Further review of the records
revealed the following findings:
 Rent of 65,000 was received from a lessee on December 23, 2018 and was
recorded as income at that time even though the rental pertains to 2019.
 The following salaries payable have been consistently omitted at year-end 2017-
55,000; 2018-75,000; 2019-47,000.
 Invoices for office supplies have been charged to expense when received.
Inventories of supplies on hand at the end of each year have been ignored, and
no entry has been made for them. 2017-65,000; 2018-37,000; 2019-71,000.
 A major repair costing 270,000 made on June 30, 2018 on an equipment had been
charged as an outright expense even if the major repair extended the remaining
life of the said equipment from 4 years to 6 years.
 Dividends declared at the end of each year were not recorded until paid the
following year amounting to 90,000, 120,000, and 150,000 for 2017 to 2109
respectively.

What is the correct net income in 2017?

a. 1,460,000
b. 1,480,000
c. 1,660,000
d. 1,707,500

What is the correct net income in 2018?

a. 1,984,500
b. 1,962,000
c. 2,049,500
d. 1,864,500

What is the correct net income in 2019?

a. 2,177,000
b. 2,132,000
c. 2,067,000
d. 1,982,000

What is the net adjustment to beginning retained earnings in year 2019?

a. 144,5000
 b. 47,000
c. 24,500
d. 89,500

What is the effect of the errors to the 2019 working capital?

a. 24,000
b. 61,000
c. 89,000
d. 126,000