Escolar Documentos
Profissional Documentos
Cultura Documentos
Accuracy - amounts and other data relating to recorded Completeness - all disclosures that should have been
transactions and events have been recorded appropriately. included in the financial statements have been included.
Cutoff- transactions and events have been recorded in the Occurrence ...9DP rights and obligations - disclosed events1
correct accounting period. transactions1 and other matters have occurred and pertain
to the entity.
Assertions about account balances at the period end: Classification and uoderstandability - financial information
(RECV) is appropriately presented and described, and disclosures
are clearly expressed.
Rights and obligations - the entity holds or controls the
rights to assets, and liabilities are the obligattons of the
Accuracy and valuation - financial and other information
entity.
are disclosed fa>rly and at appropriate amounts.
1. Authority and responsibility for controlling the 6. Deliveries of materials, finished stock and merchandise
inventories should be centralized management and in should be made only upon specific authorizations
one person. emanating at authorized levels.
2. There should be careful selection of inventory 7. Slow-movmg, obsolete and damaged stock should be
personnel and intensive training of such personnel in identified and reported following periodic reviews of
policies, objectives and system of inventory control. physical and book reco rds by qualified employees.
Valuation on the basis of approved cost-mark-down
3. Adequate physical facilities for handling and storage of
methods should be reviewed.
inventory shold be provided.
8. Safegu,ards against that action of the element and
4. Adequate system of procedures, forms and reports
inaccuracies in recording receipts and issues should be
related to the management of inventories should be
adopted. Example - Maintaining adequate insur<,mce
developed and implemented.
coverage.
5. Quantitative controls through perpetual mventory
records; book quantities verified with physical counts
at least once a year and differences being investigated,
promptly adjusted and reported to higher authority
should be implemented.
Existence: Recorded inventory exist Completeness: Purchases that occurred are recorded
1. Before the client takes the phys1cal inventory, review Trace a sequence of receiving reports to entries in the
and approve the client's written plan for taking it. voucher reg,ster. Test cutoff. Account for a sequence of
2. Observe the client personnel physically counting entries in the voucher register.
inventory.
Occurrence: Recorded purchases are for items that were
3. Confirm inventories on consignment and held in public
acquired
warehouses.
Examine underlying documents for authenticity and
reasonableness. Scan voucher register for large or
Completeness: All inventory of the entity recorded unusual items. Trace inventory purchased to perpetual
records. Scan voucher register for duplicate payments.
4. Obtain a copy of prenumbered inventory tags used by
the client in taking inventory and reconcile the tags to
Classification: Purchase transactions have been recorded in
the listing.
the proper accounts
5. For selected items, trace from tags to listing.
For a sample of entries in the purchases journal, verify the
6. Perform cutoff procedures. Obtain the receiving report accuracy of account coding.
number for the last shipment received prior to year
end and determine that the item is included in
inventory. Also, identify the last shipping document Accuracy (Valuation): Purchases are recorded at proper
and determine, based on shipping terms, whether the amounts
item was properly recorded in sales or inventory.
Recompute invoices and compare invoice price to purchase
7. Perform analytical procedures.
order.
11. Verify computations in the inventory listing. Accuracy (Valuation): Production transactions are
12. Review the obsolescence of the inventory by: recorded at proper amounts
a. being alert while observing Inventory being taken
Test cost records by tracing to underlying documents, such
for damaged, slow-moving, or scrap inventory.
as bill of materials, labor tickets, authorized labor rates,
b. Scanning perpetual records for slow-moving items
and standard overhead rates. Review variances.
and discussing their valuation with client.
EXCEL PROFESSIONAL SERVICES, INC. - f"-r' ._- to " ea'--e'PC fl Li>t4hnAl o:;- trl\lf"Y,
. PROBLEM NO. 1
\..+1.1 i<rf<'M4Vi. QUESTIONS.
lll'lky ')..l>l'l. Cf e*"")
You were engaged by Quezon Corporation
fo r the audit Based on the above and the result of your audit, determine
of the company's financ ial statements for the year ended the following:
December 31, 2014. The co mpany IS en gage d in the ' r
who I esaI e bus1ness anct makes a II sa1 es at 25a,
m over cost . A . s a I es for the year ended D ecem ber 31 , 2014
a. PS,2SO,OOO c. PS,400,000
Date
SALES
ReL Date
PURCHASES
Ref. Amount b. P3, 754,000 _cj,. P3,818,000
Balance
forwarded P5,200,000
Bala nce
forwa rded P2,700,000 A 3. Inventory as of Dece mb e r 31, 20i4
a. P864,000 c. P968,000
Dec. 51 No. Dec. RR No.
b. PSOO,OOO d. P814,000
27 965 40,000 27 1057 35,000 .
Dec.
28
51 No.
966 150,000
Dec.
28
RR No.
1058 65,000
4 AccoJnts receivable as of December 31, 2014
a. P350,000 c. P370,000
Dec. 51 No. Dec. RR No .. b. P220,000 d. P120,000
28 967 10,000 . 29 1059 24,000 l
Dec . 51 No. Dec. RR No. f\ 5. Accounts payable as of December 31, 2014
31 969 46,000 30 1061 70,000 a. P41S,OOO c. P 400,000
Dec. 51 No. Dec. RR No. b. P354,000 d. P1,218,000
31 970 68,000 31 1062 42,000
Dec
31
Sl No.
971 16,000
Dec.
31
RR No.
1063 64,000
/vBLEM NO. 2
Dec. Closing Dec. Closing
31 entry (5,530,000) 31 entry (1,000.000) Dunng your audit of the Makati Corporation for the year
ended December 31, 2014, you found the following
L !'__ ---=
Note: 51 = Sale s Invoice RR = Receiving Report information relating to certain inventory transactions from
your observation of the client's physical count and review
of sales and p u rchases c utoff :
Inventory P600,000
Accounts receivable 500,000 a. Goods costing P180,000 were received from a vendor
Accoun\S payable 400,000 on January 3, 2015. The goods were not included in
the physical count. The related invoice was r ece ived
You observed the physical in v entory of goods 1n the and recorde d on De cember 30, 2014. The goods were
warehouse on December 31 and were satisfied that it was shipped on De cember 31, 2014, terms FOB shipping
properly taken. point.
The cost of sales for the year ended December 31, e) Through the carelessness of the
2014 is overstated by receiving department shipment in
a. P290,000 c. P440,000 early December 2014. was damaged
b. PllO,OOO d. P380,000 by rain. This shipment was later sold
in the last week of December at cost. 150,000
The profit for the year ended December 31, 2014 is
misstated by
REQUIRED:
a. P190,000 over c. P140,000 under
b. P 10,000 over d. P290,000 under 1. Gross profit rate for 11 months ended November 30,
The working capital as of December 31, 2014 IS 2014. 2-c-;.
misstated by 2. Cost of goods sold during the month of December
a. P190,000 over c. P140,000 under 2014 using the gross profit method. l1"ff0,1160
b. P 10,000 over d. P290,000 under
3. December 31, 2014 inventory using the gross profit
SOLUTION GUIDE method. /1 7' )11 b
Over Under)
SOLUTION GUIDE:
Requirement No. 1
In conducting your audit for the year ended December 31, Unadjusted 1,425,000 10,125,000 12,000,000
2014, you were satisfied that the system of internal control - -
a ji'2,_0D
was good. . Accordingly, you observed the physical
inventory at an interim date, November 30, 2014 instead b - / "\ ! (r-.-- :l>i:o'
t . .,::I
of at year end. You obtained the following information
-
from your client's general ledger: c
'' ' .
Inventory, January 1, 2014 p1,312,500 d t:;.. cue: '& -- .
Physical inventory, November 30, 2014 1,425,000 i e -
Sales for 11 months ended Nov. 30, 2014 12,600,000 --i---- - _____j
Sales for the year ended Dec. 31, 2014 14,400,000
Purchases for 11 months ended Nov. 30, .
Adjusted i, -_,_.r,, s:-"J) i 1_ '1 0 :t<io i: . :.:.. :J
2014 (before audit adjustments) 10,125,000
Purchases for the year ended Dec. 31, Requirement No. 2
2014 (before audit adjustments) 12,000,000 Sales, up to 12/31 P14,400,000
Less sales, up to 11/30 _1600,000
Your audit disclosed the following information; Sales- December 1,800,000
a) Shipments received in November and Sales without profit 150,000)
included in the physical inventory but Sales with profit 1,650,000
"'
x Cost ratio
'
On
n April
warehouse
21, 2014, 2
of Muntinlupa
J:ged
Com pany.
the office and
The only
Based on the above and the result of your audit, answer
the following:
accounting record saved was the general ledger, from { 1 /"'H ow much is the adjusted balance of Accounts Payable
which the trial balance below was prepared. fl/ as of April 21, 2014?
a. P286,000 c. P237,000
Muntinlupa Company
b. P106,000 d. P343,000
Trial Balance .
March 31, 2014 0 ow much is the net purchases for the period January
1 to April 21, 2014?
DEB!'( CREDIT
a. P650,500 c. P660,000
Cash p 180,000
b. P673,500 d. P683,000
Accounts receivable 400,000
Inventory, Dec. 31, 2013 750,000
(,;-.-1i ow much is the adjusted balance of Accounts
Receivable as of April 21, 2014?
Land 350,000 a. P400,000 c. P360,000
Building 1,100,000 b. P440,000 d. P354,000
Ace. depreciation P 413,000 u-/How much is the sales for the period January 1 to April
Other assets 56,000 21, 2014?
a. P1,430,000 c. P1,510,000
Accounts payable 237,000
b. P1,519,500 d. P1,506,000
Accrued expenses 180,000
Share capital, PlOD par 1,000,000 L,_ 5/'}i ow much is the cost of sales for the period January 1
Retained earnings 520 ' 000
/ to April 21, 20147
a. P786,500 c. P830,500
Sales 1,350,000 b. P835,725 d. P828,300
Purc h ases 520,000
6 . /How much is the estimated inventory on April 21,
Operating expenses 344 000
f"'/ 2014?
Totals P3 700.00Q a. P570,000 c. P623,500
b. P587,775 d. P579,500
The following data and information have been gathered:
\:>0ow much is the estimated inventory Fire l oss?
a. The company's y is December 31. a. P579,500 c. P535,000
b. P477,000 d. P512,000
b. An examination of th'e April o statement and
cancelled checks revealed that checks written during
the period April 1 to 21 totaled P130,000: P57,000 ftLEM NO. 5 (00( Jl) c,.,.
4, paid to accounts payable as of March 31, P34,000 for ,
April merchandise purchases, and P39,000 paid for
.
You are engaged rn the regular annual exa
accounts and records of Valenzuela Manufacturing Co,
ination of the
other expenses. Deposits during the same period
't amounted to P129,500, which consisted of receipts on for the year ended December 31, 2014. l9.. reduce the
account from customers with the exception of a P9, 500 workload at year . .e_nd, the company, upon your
refund from a vendor for merchandise returned in recommendation, took rts annual physical i nventor y on
April. November 30, 2014. You observed the taking of the
inventory and made tests of the inventory count and the
c. Correspondence with suppliers revealed unpaid inventory records .
.,. obligations at April 21 of P106,000 for April
merchandise purchases, including P;2 3,000 for
' The company's inventory account, which inc!udes raw
shipments in trans1t on that date . Mv materials and work-in-process is on perpetual basis.
Inventories are valued at cost, first-in, first-out method.
d. Customers ack nowl edged indebtedness of P360,000 at
April 21. It was also estimated that customers owed There is no finished goods inventory.
--------
'
. .
Your audit also disclosed the following information about (/ 4. A client maintains perpetual inventory, records in both
the December 31 inventory: quantities and pesos. If the assessed level of control
a. Total debits to the following accounts during December risk is high an auditor will probably
were: a. Apply gross profit tests to ascertain the
Cost of sales P1,920,800 reasonableness of the physical counts.
Direct labor 338,800 b. Increase the extent of tests of controls. relevant to
Purchases 691,600 the inventory cycle.
c. Request the client to schedule the physical
b. The cost of sales of P1,920,800 included direct labor of
inventory count at the end of the year.
...- <
P386,400.
d. Insist that the client perform physical counts of
inventory items several times during the year.
QI)ESTIONS:
Based on the above and the result of your audit, determine 5. The physical count of inventory of a retailer was bigber
the following: than shown by the perpetual records. Which of the
following could explain the difference?
r djusted amount of physical inventory at November 30
c. P1,845,760
a. Inventory item has been counted but the tags
a. P1,715,560
placed on the items had not been taken off the
6. P1,631,560 d. P1,722,560
.items and added to the inventory accumulation
.
a.
justed amount of inventory at December 31
P1,509,760 c. P1,502,760 b.
sheets.
Credit memos for several items returned by
b. P1,516,760 d. P1,425,760 customers had not been recorded. -4< Vl""v.r..c. >"-'i'; IL:
c. No journal entry had been made on the retailer's
b,3. M st of materials on hand, and materials included in books for several items returned to its suppliers.
U/ work in process as of December 31 d. An item purchased "FOB shipping point" had not
a. P819,560 c. P728,560 arrived at the date of the inventory count and had
b. P812,560 d. P942,760 not been reflected in the perpetual recordsct
./'i'he amount of direct
ll.4 labor included in work in process r
"-" 6. Purchase cut-off procedures should be designed to test
tl/ as of December 31
a. P618,800 c. P338,800 whether all inventory
Purchas.ed and received before year-end was paid
b. P232,400 d. P386,400 <)_,
for.
Cs. ..xhe amount of factory overhead included in work in b. Ordered before year-end was received.
/ brocess as of December 31 c. Purchased and received before year-end was
a. P 772,800 c. P464,800 recorded.
b. P1,237,600 d. P777;600 d. Owned by the company,is in the possession o(the
+
company at year-end.
)i.
;."'"""' , Pi->'-"' _9.. Decrease in the ratio of gross profit to sales.
. /An
C,"' aud1tor is most likely to inspect loan agre ments c. Ratio of inventory to accounts payable.
under which an entity's inventories are pledged to <f Comparison of inventory values to purchase
support management's financial statement assertion of _.. invoices.
a.. Existence or occurrence.
6. Completeness. An auditor is rJ1ost _jikeJy to learn of slowmoving
'C Presentation and disclosure. inventory through
'Cl. Valuation or allocation. a. Inquiry of sales personnel
:.. Inquiry of warehouse personnel
An auditor selected items for test counts while Physical observation of inventory
observing a client's physical inventory. The auditor d. Review of perpetual inventory records.
then traced the test counts to the client's inventory
listing: This procedure most likely obtained evidence \t) 10. The auditor tests the quantity of materials charged to
concerning work in process by tracmg these quant1t1es to
a. Existence. 57 Rights. a. Cost ledgers.
b. Completeness. g.r Valuation. j1 Perpetual inve:ntory records.
<"'
_:.Jt l.lmpt,( c. Receiving reports.
>- "'IIW'1 = Cl>s d. Material requisitions.
Jay Roy Retailmg Ltd is a food wholesaler that supplies independent grocery stores. The company operates a perpetual
inventory system, with the first-in, first-out m"ethod used to assign costs to inventory items. Transactions and other
related information regarding two of the items (baked beans and plain flour) carried by lay Roy Ltd are given below for
June 2014 the last month of the company's reporting period.
Baked beans Plain flour
Unit of packaging Case containing 25 x 410g cans Box containing 12 x 4kg bags
Inventory@ 1 June 2014 35,000 cases@ P19.60 62,500 boxes @ P38.40
Purchases 1. 10 June: 20,000 cases@ P9.50 per 1. 3 June: 15,000 boxes@ P38.45
case 2. 1 5 June: 20,000 boxes@ P38.45
2. 19 June: 47,000 cases@ P19.70 per 3. 29 June: 24,000 boxes@ P39. 00
case
Purchase terms 2/10, n/30, FOB destination n/30, FOB destination
'
June sales 73,000 cases@ P28.50 95,000 boxes@ 4o.oo
Returns and allowances A customer returned 5,000 cases that had As June 15 purchase was unloaded, 1,000
been shipped in error. The customer's boxes were discovered damaged. A credit
account was credited for P142,500. of P38,450 was received byJay Roy
Retailing Ltd.
Physical count at 30 June
2014 32,600 cases on hand 1,500 boxes on hand
Explanation of variance No explanation found assumed stolen Boxes purchased on 29 June still in transit
on 30 June
Net realizable value at 30
June 2014 P29.00 per case P38.50 per box
PROBLEM NO. 2 .
/,
\ll!'f !/.011 <;\
The Bolinao Company values its inve'ntory at the lower of C,s. The entry on Jan. 8 will include a debit to Raw
FIFO cost or net realizable value (NRV)
. The Inventory Materials Inventory of
accounts at December 31, 2013, had the following a. P200,000 .e. P 1 4 1,120
__..
balances. b. P144,000 d. P1 96,00 0
Raw materials p 650,000 J /The repossessed inventory on Feb. 14 is most likely to
Work in process 1,200,000 II' be valued at
Finished goods 1,640,000 a. P14,000 S P17,200
b. P24,000 d. P14,400
lJr he journal entries on April 3 will include a 2. December invoices totaling P'13,200 were entered in
a. Debit to Cash of P24,000. the voucher register in December, but goods were not
b. Debit to Cost of Repossessed Goods Sold of received until January
P14,000.
c. Credit to Profit on Sale of Repossessed Inventory End of the Year
of P3,600.
3. Sales of P43,000 (cost of P12,900) were made on
d. Credit to Repossessed Inventory of P20,400.
account on December 31 and goods delivered at that
.'6 o/The trade-in inventory on Aug. 30 is most likely to be time, but all entries relating to the sales were made
7' valued at on January 2.
a. PS,OOO c. P6,000
+4. Invoices totaling PJ 5,000 w ere entered in the voucher
b, P4,800 d. P6,400
register in January, but the goods were received in
\;; ow much will be recorded as Sales on Aug. 30? December.
a. P51,200 c. P57 ,200
5. December invoices totaling P18,000 were entered in
"1).' P56,000 d. P57,600
the voucher register in December, but the goods were
not received until January.
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