AUDIT PROBLEMS Exam

In auditing the books of the Swift Company, you are provided with the following trial balance
as of December 31, 2003. You have developed the additional data referred to in the notes.

Debit
Cash
P 40,000
Accounts receivable note A
70,000
Inventory, at cost note B
100,000
Investments in stocks and bonds
270,000
Land
159,000
Buildings
400,000
Machinery and Equipment
340,000
Furniture, Fixtures and Equipment
20,000
Accumulated depreciation
Patents note C
51,000
Goodwill note E
1,000
Accounts payable
Bonds payable
Capital stock note D
Retained earnings note E
Sales
Cost of goods sold
601,000
Operating expenses
335,000
Other charges
20,000
Totals
P2,407,000

Credit

P 154,000
234,000
300,000
500,000
69,000
1,150,000
_________
P2,407,000

Notes:
A Analysis of accounts receivable showed:
Trade customers
P72,500
Due from officers and employees
2,500
Estimated doubtful accounts (recorded as
write-off under the allowance method)
5,000
B Inventory at lower of cost or market
95,000
C Patents dated January 1, 1994, acquired by purchase
January 1, 1996, original cost
51,000
D Capital stock:
Six percent cumulative preferred, P100 par value, authorized 3,000
shares; issued 2,500 shares. Common stock, authorized 500,000
shares, no par-value, stated value P5.00 per share; issued, 50,000
shares.
E Retained earnings analysis showed:
Accumulated net losses to January 1, 2003
P62,000
Excess of selling price of common stock
over stated value
60,000
Premium on preferred stock
70,000
Goodwill per board resolution
1,000
F Cash surrender value of life insurance policies on company officers as of
December 31, 2003, P12,000, and on December 31, 2002, P9,000
Compute the adjusted balances of the following accounts on December 31, 2003:
1. Accounts Receivable
(a) P67,500

(b) P70,000

(c) P72,500

(d) P77,500 C

2. Inventory
(a) P95,000

(b) 100,000

(c) P105,000

(d) P110,000A

3. Investments

4. Goodwill
(a) P 0

(b) P950

(c) P1,000

(d) P1,050

5. Cost of Goods Sold

(a) P599,400

(b) P601,000

(c) P606,000

(d) P609,400B or C

6. Operating Expenses
(a) P335,000

(b) P335,400

(c) P338,400

(d) P326,400B

(c) P47,200

(d)

(c) P70,000

(d) P130,000D

9. Trade and Other Receivables

(a) P70,000
(b) P72,500

(c) P75,000

(d) P77,500 C

10.Cash Surrender Value

(a) P 0
(b) P3,000

(c) P9,000

(d) P12,000 D

7. Retained Earnings, January 1

(a) P29,200
(b) P62,000
D
8. Additional Paid In Capital
(a) P 0
(b) P60,000

(P76,800)