AUDITING PROBLEMS

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:

Pricing tests showed that the physical inventory was overstated by P61,600.

An understatement of the physical inventory by P4,200 due to errors in footings and

extensions.

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.

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:

Total debits to the following accounts during December were:

Cost of sales
P1,920,800
Direct labor
338,800
Purchases
691,600

The cost of sales of P1,920,800 included direct labor of P386,400.

QUESTIONS:

Based on the above and the result of your audit, determine the following:

Adjusted amount of physical inventory at November 30, 2012

a.
P1,715,560
c.
P1,845,760
b.
P1,631,560

d.
P1,722,560

Adjusted amount of inventory at December 31, 2012

a.
P1,509,760
c.
P1,502,760
b.
P1,516,760
d.
P1,425,760

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

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

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:

Accumulated

Cost
depreciation
Land
P 275,000

Buildings
2,800,000

P 672,900
Machinery and equipment
1,380,000

367,500
Automobile and trucks
210,000

114,326
Leasehold improvements

432,000

108,000
Totals
P5,097,000
P1,262,726

Additional information on depreciation, amortization methods, and useful lives follows:

Depreciation

Asset
method
Useful life
Buildings
150%-declining25 years.

balance

Machinery and equipment

straight-line
10 years
Automobile and trucks
150%-declining5 years

(all acquired after 2009)

balance

Leasehold improvements
straight-line

Depreciation is computed to the nearest month.

Salvage values of depreciable assets are immaterial except for automobiles and trucks
which have estimated salvage values equal to 15% of cost.

Other additional information:

PRTC entered into a twelve-year operating lease starting January 1, 2009. The leasehold
improvements were completed on December 31, 2008 and the facility was occupied on
January 1, 2009.

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 August 30, 2012, PRTC purchased a new automobile costing P25,000.

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:

Total depreciation

a.
P460,228
c.
P470,528
b.
P462,678
d.
P461,528
Carrying amount of buildings

a.
P3,409,474
c.

P3,028,774
b.
P3,761,974
d.
P3,381,274

Carrying amount of machinery and equipment

a.
P1,197,375
c.
P1,243,925
b.
P1,180,275
d.
P1,222,075

Carrying amount of automobiles and trucks

a.
P68,472
c.
P61,722
b.
P59,472
d.
P52,722
10. Carrying amount of property, plant and equipment

a.
P5,637,371
c.
P5,615,521
b.
P5,608,771
d.
P5,590,821

PROBLEM NO. 3

You noted the following items relative to the companys Intangible assets in connection with
your audit of the PRTC Corporations financial statements for the year 2012.

Franchise

On January 1, 2012, PRTC signed an agreement to operate as franchisee of Clear Copy

Service, Inc. for an initial franchise of P680,000. Of this amount, P200,000 was paid when
the agreement was signed and the balance was payable in four annual payments of
P120,000 each, beginning January 1, 2013. The agreement provides that the down payment
is not refundable and no future services are required of the franchisor. The implicit rate for
loan of this type is 14%. The agreement also provides the 5% of the revenue from the
franchise must be paid to the franchisor annually. PRTCs revenue from the franchise for
2012 was P8,000,000. PRTC estimates the useful life of the franchise to be ten years.

Patent

On July 1, 2012, PRTC purchased a patent from the inventor, who asked P1,100,000 for it.
PRTC paid for the patent as follows: cash, P400,000; issuance of 10,000 shares of its own
ordinary shares, par P10 (market value, P20 per share); and a note payable due at the end
of three years, face amount, P500,000, noninterest-bearing. The current interest rate for this
type of financing is 12 percent. PRTC estimates the useful life of the patent to be ten years.

Trademark

PRTC purchased for P1,200,000 a trademark for a very successful soft drink it markets under
the name POWER!. The trademark was determined to have an indefinite life. A competitor
recently introduced a product that is in direct competition with the POWER! product, thus
suggesting the need for an impairment test. Data gathered by the entity suggests that the
useful life of the trademark is still indefinite, but the cash flows expected to be generated by
the trademark have been reduced either to P40,000 per year (with a probability of 70%) or
to P80,000 per year (with 30% probability). The appropriate risk-free interest rate is 5%. The
appropriate risk-adjusted interest rate is 10%.

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
c.
P448,950

b.
P535,200
d.
P454,964

12.
Carrying amount of franchise as of December 31, 2012

a.
P549,644
c.
P538,733

b.
P494,680
d.
P612,000
13.
Carrying amount of patent as of December 31, 2012

a.
P1,045,000
c.
P860,310

b. P 955,900
d.
P908,105
14.
Total expenses related to the intangible assets in 2012

a.

P662,759
c.
P733,063

b.
P711,709
d.
P802,212

In auditing intangible assets, an auditor most likely would review or recompute amortization
and determine whether the amortization period is reasonable in support of managements
financial statement assertion of

a.
Valuation.
c.
Completeness.
b.
Existence or occurrence.
d.
Rights.

PROBLEM NO. 4

You are conducting an audit of the PRTC Company for the year ended December 31, 2012.
The internal control procedures surrounding cash transactions were not adequate. The
bookkeeper-cashier handles cash receipts, maintains accounting records, and prepares the
monthly bank reconciliations.

The bookkeeper-cashier prepared the following reconciliation at the end of the year:

Balance per bank statement

P350,000
Add: Deposit in transit
P175,250

Note collected by bank

15,000
190,250
Total

540,250
Less outstanding checks

246,750
Balance per general ledger

P293,500

In the process of your audit, you gathered the following:

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.

Included in the list of outstanding checks were the following:

A check payable to a supplier, dated December 29, 2012, in the amount of P14,750,
released on January 5, 2013.

A check representing advance payment to a supplier in the amount of P37,210, the date of
which is January 4, 2013, and released in December, 2012.

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
P600,000
Land
P400,000
Gain on sale of land
200,000
December 31, 2012

Cash

P224,000
Notes receivable
P200,000
Interest income
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
c.
P120,061

b. P 94,868
d.
P200,000
22.

Profit for 2012 is overstated by

a.
P50,460
c.
P54,902

b.
P31,130
d.
P
0

23. The entitys working capital at December 31, 2012 is overstated by

a.
P235,765
c.
P182,476
b.
P232,936
d.
P
0

All of the following are examples of substantive tests to verify valuation of net accounts
receivable except the

Re-computation of the allowance for bad debts.

Inspection of accounts for current versus non-current status in the statement of financial
position.

Inspection of the aging schedule and credit records of past due accounts.

Comparison of the allowance for bad debts with past records.

Confirmation, which is a specific type of inquiry, is the process of obtaining a representation

of information or of an existing condition directly from a third party. Two assertions for which
confirmation of accounts receivable balances provides primary evidence are

Completeness and valuation

Rights and obligations and existence

Valuation and rights and obligations

Existence and completeness

PROBLEM NO. 6

You were engaged by PRTC Corporation, a small and medium-sized entity, to audit its
financial statements for the year 2012. During the course of your audit, you noted the
following regarding its recent acquisitions of investments in equity securities:

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.

On 2 January 2012 entity B declared and paid dividends of P1 million for the year ended
2011.

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.

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.

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.

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:

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

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

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

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

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
Amount
April 31, 2012
P 700,000
July 31, 2012
900,000
February 1, 2013
800,000
April 30, 2013
1,200,000
June 30, 2013
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

P 252,000
Warranty claims honored on

2011 2012 sales

285,000
Total
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
c.
P630,000

b.

P345,000
d.
P882,000
32.
Unamortized bond discount

a.
P110,000
c.
P200,000

b.
P100,000
d. P 90,000
33.
Bond interest payable

a.
P
0
c.
P150,000

b.
P300,000
d.
P250,000
34.
Total current liabilities

a.
P6,445,000
c.
P5,445,000

b.
P5,105,000
d.
P3,945,000
35.
Total noncurrent liabilities

a.
P7,700,000
c.
P7,590,000

b.
P7,500,000
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

P 270,000
Ordinary share capital, P20 par
1,598,400
Share premium preference
36,800
Share premium ordinary
235,200
Share premium treasury shares
3,200
Retained earnings
1,585,840
Total shareholders equity
P3,729,440

PRTC had 65,000 ordinary shares as December 31, 2010.

The following shareholders equity transactions were recorded in 2011 and 2012:

2011

May 1
- Sold 9,000 ordinary shares for P24, par

value P20.
July 1
- Sold 700 preference shares for P124, par

value P100.
Jul. 31
- Issued an 8% share dividend on ordinary

shares. The market value of ordinary

share was P30 per share.

Aug. 30
-

Declared cash dividends of 12% on

preference shares and P3 per share on

ordinary shares.
Dec. 31
Profit for the year amounted to

P1,345,040.
2012

Feb. 1
- Sold 2,200 ordinary shares for P30.
May 1
- Sold 600 preference shares for P128.
May 31
- Issued a 2-for-1 split of ordinary shares.

The par value of the ordinary share was

2012

reduced to P10 per share.

Sep. 1 - Purchased 1,000 ordinary shares for P18

to be held as treasury shares.

Oct. 1 - Declared and paid cash dividends of 12%

on preference shares and P4 per share on

ordinary shares.

Nov. 1 - Sold 1,000 shares of treasury shares for

P22.

Dec. 31

- Profit for the year amounted to P991,520.

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
c.
P4,182,400

b.
P4,171,200
d.
P4,157,200
39.
Basic earnings per share for 2011

a.
P17.12
c.
P 8.56

b.
P 8.21
d.
P18.49
40.
Basic earnings per share for 2012

a.
P7.40
c.
P5.86

b.
P7.34
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

P 150,000
Marketable securities , at cost
60,000
Accounts receivable
450,000
Allowance for doubtful accounts
( 59,000)
Inventories
430,000
Prepaid insurance

__15,000
Total current assets
1,046,000
Property, plant and equipment
426,000
Less accumulated depreciation

( 40,000)
Property, plant and equipment, net

386,000
Research and development costs

120,000
Total assets
P1,552,000
Liabilities and Shareholders' equity

Current liabilities:

Accounts payable and accrued expenses

P 592,000
Income taxes payable

224,000
Total current liabilities
816,000
Shareholders' equity:

Share capital, P10 par value

400,000
Retained earnings

336,000
Total shareholders' equity

736,000
Total liabilities and shareholders' equity
P1,552,000

PRTC Corporation

Statement of Income

For the Fiscal Year Ended November 30, 2012

Net sales
P2,950,000
Operating expenses:

Cost of sales
1,670,000
Selling and administrative
650,000
Depreciation
40,000
Research and development

30,000

2,390,000
Income before income taxes

560,000
Provision for income taxes

224 000
Net income
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:

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.

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.

Inventories at November 30, 2012 did not include work in process inventory costing
P12,000, sent to an outside processor on November 29, 2012.

A P3,000 insurance premium paid on November 30, 2012 on a policy expiring one year later
was charged to insurance expense.

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.

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.

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.

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.

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
c.
P235,260

b.
P283,260
d.

P239,760
42.
Current assets

a.
P1,084,000
c.
P1,079,000

b.
P1,061,000
d.
P1,073,000
43.
Total assets

a.
P1,484,200
c.
P1,489,200

b.
P1,486,600

d.
P1,491,600
44.
Total liabilities

a.
P833,340
c.
P855,840

b.
P783,340
d.
P805,840
45.
Total equity

a.
P683,260
c.
P639,760

b.

P635,260
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
P
275,000
P150,000
Trading securities

78,000

78,000
Accounts receivable

487,000
392,000
Allow. for doubtful accounts

(50,000)

(32,000)
Inventories

425,000

307,000
Property and equipment

310,000

217,000
Accumulated depreciation
(150,000)

(121,000)
Total assets
P1,375,000
P 991,000
Liabilities and Equity

Accounts payable and accrued

liabilities
P
420,000
P347,000
Estimated liability from lawsuit

100,000

Share capital, P10 par

260,000

260,000
Share premium

130,000

130,000

Retained earnings

465,000
254,000

Total liabilities and equity

P1,375,000
P 991,000

PRTC, Inc.

Income Statements

For the Years Ended December 31, 2012 and 2011

2012
2011

Net sales
P1,580,000
P1,250,000
Operating expenses:

Cost of sales
P 755,000
P 690,000
Selling and admin.
485,000
365,000
Depreciation
29,000
18,000
Est. loss from lawsuit

100,000
-

P1,369,000
P1,073,000
Profit
P 211,000
P 177,000

During the course of the audit, the following additional information was obtained:

The trading securities were acquired on December 31, 2011. The securities have a fair value
of P67,000 at December 31, 2012.

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.

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.

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.

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.
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