I AUDIT OF CASH AND CASH EQUIVALENTS

CHECK FIGURES

PROBLEM NO. 1 Composition of cash and cash equivalents

Cash and cash equivalents P3,584,000

PROBLEM NO. 2 Computation of adjusted cash and cash equivalents

(including preparation of adjusting entries)

a. Cash on hand P282,000

b. Petty cash fund P6,700
c. BPI current account P1,086,000
d. Cash and cash equivalents P2,914,700

PROBLEM NO. 3 Cash count and shortage computation

(including preparation of adjusting entries)

Cash shortage P40,332

PROBLEM NO. 4 Bank reconciliation using the three methods

(including preparation of adjusting entries)

Adjusted balance P75,000

PROBLEM NO. 5 Bank reconciliation and shortage computation

(including preparation of adjusting entries)

a. Adjusted deposit in transit P125,250

b. Adjusted outstanding checks P194,790
c. Adjusted cash in bank P250,460
d. Cash shortage P60,000

PROBLEM NO. 6 Cash shortage computation

(including reconstruction of cash balance)

Cash shortage P30,000

1
PROBLEM NO. 7 Proof of cash using the three methods
(including preparation of adjusting entries)

Adjusted November 30 balance P320,000

Adjusted December receipts P290,000
Adjusted December disbursements P410,000
Adjusted December 31 balance P200,000

PROBLEM NO. 8 Proof of cash using the three methods

(including preparation of adjusting entries)

Adjusted November 30 balance P12,490

Adjusted December receipts P282,190
Adjusted December disbursements P273,100
Adjusted December 31 balance P21,580

PROBLEM NO. 9 Proof of cash using the three methods

(including preparation of adjusting entries)

Adjusted November 30 balance P279,450

Adjusted December receipts P2,227,200
Adjusted December disbursements P2,179,850
Adjusted December 31 balance P326,800

PROBLEM NO. 10 Proof of cash (including computation of ending deposit in transit

and outstanding checks)

Deposits in transit, December 31 P54,900

Outstanding checks, December 31 P90,490
Adjusted November 30 balance P64,000
Adjusted December receipts P128,900
Adjusted December disbursements P98,990
Adjusted December 31 balance P93,910

PROBLEM NO. 11 Proof of cash using the three methods

(including determination of reconciling items)

Adjusted November 30 balance P64,819

Adjusted December receipts P75,410
Adjusted December disbursements P77,652
Adjusted December 31 balance P62,577

2
PROBLEM NO. 12 Proof of cash using bank to book method

1. Cash receipts per books in July P9,400,000

2. Cash disbursement per books in July P6,550,000
3. Cash balance per books at July 31 P5,350,000
4. Adjusted cash balance at July 31 P5,400,000

PROBLEM NO. 13 Proof of cash using bank to book method

(including hypothecation of accounts receivable)

1. Unadjusted balance per books as of November 30 P504,000

2. Unadjusted book receipts for December P735,000
3. Unadjusted book disbursements for December P700,000
4. Unadjusted balance per books as of December 31 P539,000

PROBLEM NO. 14 Three-dated bank reconciliation using adjusted balance method

(including computation of deposits in transit and outstanding
checks)

a. Deposits in transit as of December 31, 2012 P40,490

b. Outstanding checks as of December 31, 2012 P97,230
c. Deposits in transit as of January 12, 2013 P19,230
d. Outstanding checks as of January 12, 2013 P50,120

PROBLEM NO. 15 Theory

1. C
2. C
3. B
4. A
5. A
6. B
7. B
8. D
9. B
10. B
11. B
12. B

3
 II AUDIT OF RECEIVABLES

CHECK FIGURES

PROBLEM NO. 1 Composition of trade and other receivables

Trade and other receivables P166,500

PROBLEM NO. 2 Computation of adjusted accounts receivable

Adjusted Accounts Receivable - Trade P1,604,000

PROBLEM NO. 3 Audit of accounts receivable and related accounts

Accounts receivable P387,400

Allowance for doubtful accounts P7,622

PROBLEM NO. 4 Audit of allowance for doubtful accounts

Adjusted allowance for doubtful accounts P 77,100

PROBLEM NO. 5 Analysis of accounts receivable and related accounts

Adjusted accounts receivable P297,800

Adjusted allowance for doubtful accounts P10,800

PROBLEM NO. 6 Audit of accounts receivable and related accounts

a. Accounts receivable P833,800

b. Allowance for doubtful accounts P25,475
c. Doubtful accounts expense P20,875

PROBLEM NO. 7 Analysis of notes receivable and related accounts

1. Noncurrent receivables P6,500,484

2. Current portion of long-term receivables P2,594,500
3. Accrued interest receivable P514,000
4. Interest income P 911,384

4
PROBLEM NO. 8 Audit of notes receivable and related accounts
(including preparation of adjusting entries)

a. Correct gain on sale of land P103,105

b. Correct interest income P70,435
c. Overstatement of profit P50,460
d. Correct carrying amount of note receivable P349,540
e. Overstatement of working capital P232,936

PROBLEM NO. 9 Audit of notes receivable and related accounts

1. The effective interest rate 13%

2. Overstatement of profit for 2011 P349,900
3. Overstatement of retained earnings as of December 31, 2012 P217,973
4. Overstatement of working capital as of December 31, 2012 P787,084

PROBLEM NO. 10 Analysis of notes receivable and related accounts

(including preparation of adjusting entries)

a. Notes receivable-trade P48,000

b. Interest income P6,267

PROBLEM NO. 11 Loan impairment

1. Interest income to be recognized in 2011 P1,059,399

2. Carrying amount of the loan as of December 31, 2011 P9,690,299
3. Loan impairment loss to be recognized in 2012 P3,875,032

PROBLEM NO. 12 Theory

1. D 5. D 9. B
2. B 6. D 10. A
3. A 7. C 11. D
4. D 8. B 12. B

5
 III AUDIT OF INVENTORIES

CHECK FIGURES

PROBLEM NO. 1 Computation of adjusted inventory

Adjusted balance of Inventory P2,373,920

PROBLEM NO. 2 Computation of adjusted inventory and related accounts

(including preparation of adjusting entries)

a. Inventory P1,190,000
b. Accounts payable P710,000
c. Net sales P9,961,000

PROBLEM NO. 3 Computation of adjusted inventory and related accounts

(including preparation of adjusting entries)

a. Sales P5,250,000
b. Accounts receivable P220,000
c. Inventory P864,000
d. Accounts payable P418,000
e. Purchases P3,018,000

PROBLEM NO. 4 Effect of inventory errors on SFP and SCI items

(including preparation of adjusting entries)

a. Inventory P140,000 under

b. Cost of sales P290,000 over
c. Profit P10,000 over
d. Working capital P10,000 over

PROBLEM NO. 5 Effect of inventory errors on SFP and SCI items

(including preparation of adjusting entries)

a. Inventory P295,000 over

b. Sales P200,000 under
c. Profit P 95,000 over
d. Working capital P 95,000 over

6
PROBLEM NO. 6 Cost flow assumptions

1. First-in, first-out (FIFO) method Inventory: P148,980; COS: P367,230

2. Moving average method Inventory: P143,485; COS: P372,725

PROBLEM NO. 7 Measurement of inventory and inventory shortage

1. Inventory shortage P27,580

2. Inventory to be reported at June 30, 2012 balance sheet P699,895

PROBLEM NO. 8 Write down of inventory to net realizable value

1. Inventory to be reported P569,850

2. Loss on inventory writedown for the month of July 2012 P82,650
3. Cost of sales including loss on inventory write down P1,290,650

PROBLEM NO. 9 Inventory estimation

December 31, 2012 inventory using the gross profit method P1,710,000

PROBLEM NO. 10 Inventory estimation

Estimated inventory fire loss P512,000

PROBLEM NO. 11 Roll-forward analysis

1. Adjusted amount of physical inventory at November 30, 2012 P1,715,560

2. Adjusted amount of inventory at December 31, 2012 P1,509,760
3. Breakdown of inventory at December 31, 2012 as to:
a. Cost of materials on hand and materials included in WIP P812,560
b. Direct labor included in work in process P232,400
c. Factory overhead included in work in process P464,800

PROBLEM NO. 12 - Theory

1. D 4. B 7. B 10. C
2. A 5. C 8. D 11. C
3. B 6. C 9. C 12. A

7
 IV AUDIT OF INVESTMENTS

CHECK FIGURES

PROBLEM NO. 1 Analysis of investments in debts instruments HFT, AFS, HTM

(preparation of journal entries under different classifications)

Carrying amount at December 31, 2012

a. the investment is designated as FA@FVTPL P980,000
b. the investment is available-for-sale P980,000
c. the investment is held-to-maturity P936,580

Gain on sale on December 31, 2013

a. the investment is designated as FA@FVTPL P10,000
b. the investment is available-for-sale P39,762
c. the investment is held-to-maturity P39,762

PROBLEM NO. 2 Audit of investments in equity instruments - FVTPL

(including preparation of adjusting journal entries)

a. Gain or loss on sale of 2,400 BACK shares on March 1 P60,000 loss

b. Total gain or loss on sales of 4WARD shares in 2012 P108,000 gain
c. Total dividend income to be recognized in 2012 P198,000
d. Carrying amount of investment as of December 31, 2012 P1,278,000

PROBLEM NO. 3 Audit of investments in equity instruments FVTOCI

(including preparation of adjusting journal entries)

1. Determine the following using PAS 39:

a. Net amount to be recognized in 2012 profit or loss P193,000
b. Carrying amount of investment as of December 31, 2012 P110,000

2. Assuming the entity applies PFRS 9, determine the following if the investment is
designated as a financial asset at fair value through other comprehensive income:
a. Net amount to be recognized in 2012 profit or loss P150,000
b. Carrying amount of investment as of December 31, 2012 P110,000

8
PROBLEM NO. 4 Analysis of investments in equity instruments (Trading and AFS)

1. Gain or loss on sale of 4,000 Totoy Bibo Inc. shares P11,875 gain
2. Net realized gain or loss on sale of 4,000 Bulaklak Inc. shares P12,000 gain
3. Carrying of trading securities and AFS as of December 31, 2012
TS: P2,304,100; AFS: P906,000

PROBLEM NO. 5 Audit of investments in equity instruments (carried at cost)

(including preparation of adjusting journal entries)

Loss on sale of 50,000 Silver Tab Company shares on July 15 P250,000

Gain on sale of 10,000 Silver Tab Company shares on December 29 P310,000
Adjusted balance of Investment in Silver Tab Company P5,580,000
Adjusted balance of Investment in Red Tab Company P30,000
Dividend income for the year ended Dec. 31, 2012 P150,000

PROBLEM NO. 6 Analysis of investments in equity and debt instruments

1. Gain or loss on sale of 8,000 Laoag, Inc. shares on March 1 P 8,000 gain
2. Gain or loss on sale of 3,200 Batac, Inc. shares on May 15 P9,600 gain
3. Total interest income for the year 2012 P289,640
4. Carrying of trading securities and AFS as of December 31, 2012
TS: P482,400; AFS: P11,466,400

PROBLEM NO. 7 Analysis of investments in equity instruments

(FVTPL and Associate)

1. Amount in profit or loss

Templar P3,000,000
Dark P156,000
2. Carrying amount in SFP
Templar P1,800,000
Dark P1,287,000

PROBLEM NO. 8 Analysis of investments in equity instruments (AFS and Associate)

1. Net amount to be recognized in 2010 comprehensive income P 85,000

2. Net amount to be recognized in 2011 comprehensive income (P25,000)
3. Adjustment to retained earnings Nil
4. The carrying amount of the investment as of December 31, 2012 P2,195,000

9
PROBLEM NO. 9 Analysis of investments in debt instruments (HTM)

1. Purchase price of the bonds on June 1, 2011 P5,467,992

2. Carrying amount of the investment in bonds as of December 31, 2011 P5,507,237
3. Interest income for the year 2012 P459,911
4. Gain on sale of investment in bonds on November 1, 2012 P120,352

PROBLEM NO. 10 Impairment of investments in debt instruments (HTM)

1. Total amount paid to acquire the investment in bonds on April 1, 2009 P11,014,674
2. Carrying amount of the investment in bonds on December 31, 2009 P10,662,100
3. Impairment loss in 2011 P3,497,900
4. Interest income to be recognized in 2012 P548,672
5. Reversal of impairment loss in 2012 P2,777,828

PROBLEM NO. 11 Analysis of investments in associates of an SME

1. Cost model P/L:P(11.78) million; CA:P39.50 million

2. Fair value model P/L:P5.72 million; CA:P57 million
3. Equity method P/L:P(8.28) million ; CA:P43.00 million

PROBLEM NO. 12 Theory

1. A
2. D
3. D
4. D
5. C
6. A
7. B
8. B
9. C
10. D

10
 V AUDIT OF PROPERTY, PLANT AND EQUIPMENT

CHECK FIGURES

PROBLEM NO. 1 Classification of property, plant and equipment expenditures

1. Land P1,216,000
2. Land improvements P620,000
3. Building P2,834,000
4. Equipment P959,000

PROBLEM NO. 2 Classification of property, plant and equipment expenditures

1. Land P4,494,000
2. Land improvements P730,000
3. Building P29,242,500

PROBLEM NO. 3 Audit of machinery and accumulated depreciation accounts

(including preparation of adjusting journal entries)

a. Loss on the sale of Machine no. 3 P42,000

b. Adjusted balance of Machinery P605,000
c. Depreciation expense for 2012 P60,500
d. Adjusted balance of Accumulated Depreciation P308,500

PROBLEM NO. 4 Audit of machinery and accumulated depreciation accounts

(including preparation of adjusting journal entries)

a. Total depreciation for the year ended December 31, 2012 P233,250
b. Carrying amount of production machine as of December 31, 2012 P1,024,500

PROBLEM NO. 5 Roll-forward analysis (Cost)

1. Land P487,500
2. Buildings P2,437,500
3. Machinery and equipment P1,493,000
4. Property, plant and equipment P5,020,500

11
PROBLEM NO. 6 Roll-forward analysis (Cost and Accumulated depreciation)

1. Total depreciation P461,528

2. Carrying amount of buildings P3,761,974
3. Carrying amount of machinery and equipment P1,222,075
4. Carrying amount of automobiles and trucks P68,472
5. Carrying amount of property, plant and equipment P5,615,521

PROBLEM NO. 7 Audit of plant and accumulated depreciation accounts

1. Total depreciation expense for 2012 P164,100

2. Adjusted balance of Plant Assets as of December 31, 2012 P1,165,000

PROBLEM NO. 8 Analysis of property, plant and equipment transactions

1. The carrying amount of the new warehouse P950,000

2. The carrying amount of plant P1,350,000
3. The total depreciation P740,000
4. The revaluation surplus is P1,720,000

PROBLEM NO. 9 Property, plant and equipment transaction errors and

their effect on profit

1. The 2009 profit is overstated by P9,000

2. The 2010 profit is understated by P50,000
3. The 2011 profit is understated by P23,500
4. The 2012 profit is understated by P138,000
5. Adjusted carrying amount of Trucks as of December 31, 2012 P354,000

PROBLEM NO. 10 Revaluation model

1. Amount to be recognized in 2011 profit or loss (P2,000)

2. Amount to be recognized in 2011 comprehensive income P2,000
3. Gain or loss on sale of Machine B P 3,500 gain
4. Total depreciation for the year 2012 P40,500
5. Amount to be recognized in 2012 profit or loss (P1,500)

PROBLEM NO. 11 Audit of borrowing costs

1. Weighted-average interest rate for the general liabilities 10.40%

2. Capitalized interest on Ship No. 341 P91,000

12
3. Capitalized interest on Ship No. 342 P162,933
4. Capitalized interest on Ship No. 343 P228,150
5. Total interest that Oceanwide should capitalize P516,403

PROBLEM NO. 12 Audit of mining entity

1. Depletion for 2011 P125,000

2. Depletion for 2012 is P187,600
3. Depletion included in 2012 cost of sales P173,300
4. Carrying amount of the natural resources as of December 31, 2012 P217,400

PROBLEM NO. 13 Audit of mining entity

1. Depletion for 2012 P1,536,000

2. Inventoriable depreciation for 2012 P614,400
3. Inventory as of December 31, 2012 P675,840
4. Cost of sales for the year ended December 31, 2012 P2,703,360
5. Maximum amount that may be declared as dividends P2,083,840

PROBLEM NO. 14 Analysis of property, plant and equipment and

investment property of an SME

1. Amount to be reported as property, plant and equipment P 21,746,400

2. Amount to be recognized in profit or loss regarding the increase in fair value of
investment properties P26,100,000
3. Total expense to be recognized in profit or loss P1,193,600
4. Assume that the fair value of the units cannot be determined reliably without undue
cost or effort on an ongoing basis, how much should be reported as line item for
investment properties in the entitys statement of financial position? Nil
5. Assume that the fair value of the units cannot be determined reliably without undue
cost or effort on an ongoing basis, how much is the total expense to be recognized
in profit or loss? P4,376,000

PROBLEM NO. 15 - Theory

1. B 6. D 11. B
2. B 7. A 12. D
3. A 8. C 13. D
4. D 9. A 14. D
5. D 10. A 15. D

13
 VI AUDIT OF INTANGIBLE AND OTHER ASSETS

CHECK FIGURES

PROBLEM NO. 1 Audit of recognition and measurement of intangible assets

(including preparation of adjusting journal entries)

Carrying amount of the Intangible assets as of December 31, 2012. P632,000

Total amount that should be expensed when incurred P1,998,000

PROBLEM NO. 2 Audit of patent

1. Cost of machine P1,752,000

2. Amount that should charged to expense when incurred P2,220,000
3. Carrying amount of patent as of December 31, 2012 P 874,800

PROBLEM NO. 3 Amortization and impairment of intangible assets

1. Total amortization of intangible assets in 2012 P 70,000

2. Total loss on impairment in 2012 P471,220
3. Carrying amount of goodwill on December 31, 2012 P718,780
4. Carrying amount of other intangible assets on December 31, 2012 P690,000

PROBLEM NO. 4 Amortization and impairment of intangible assets

1. Total amortization for the year 2012 P 73,333

2. Impairment loss for the year 2012 P133,333
3. Carrying amount of Trademark as of December 31, 2012 P166,667
4. Carrying amount of Goodwill as of December 31, 2012 P1,500,000
5. Carrying amount of Customer list as of December 31, 2012 P146,667

PROBLEM NO. 5 Expenses related to intangible assets

1. Carrying amount of franchise as of December 31, 2012 P494,680

2. Carrying amount of patent as of December 31, 2012 P908,105
3. Total expenses related to the intangible assets in 2012 P733,063

14
PROBLEM NO. 6 Impairment of cash generating unit
1. Goodwill P 0
2. Operating license P900,000
3. Property train stations and land P200,000
4. Rail track and coaches P200,000
5. Steam engines P500,000

PROBLEM NO. 7 Impairment and reversal of impairment in a cash-generating unit

12/31/12 12/31/11
Buildings, net P176,878 P230,400
Machinery, net 131,322 172,800
Goodwill - -
Inventory Not determinable 76,800
Receivables, net Not determinable 35,000
Cash Not determinable 20,000

PROBLEM NO. 8 Impairment, reversal of impairment and revaluation of patent

1. Impairment loss on January 1, 2010 P150,000
2. Gain on impairment recovery in 2012 P100,000
3. Revaluation surplus as of December 31, 2012 P140,000
4. Carrying amount patent as of December 31, 2012 P240,000

PROBLEM NO. 9 Audit of intangibles and other assets

1. Gain on sale of patent P 995,000
2. Total interest income for 2012 P1,075,500
3. Noncurrent portion of the installment contract receivable as of 12/31/12 P3,600,000
4. Carrying amount of the NR from sale of patent as of 12/31/12 P3,690,000
5. The carrying amount of the investment in Pure as of 12/31/12 P19,060,000

PROBLEM NO. 10 Audit of intangibles and other assets

1. Total amortization of the intangible assets for the year 2012 P680,000
2. Carrying amount of the intangible assets as of December 31, 2012 P9,000,000
3. Carrying amount of deferred tax asset as of December 31, 2012 P342,500

PROBLEM NO. 11 - Theory

1. D 2. C 3. A 4. B 5. A 6. A 7. D 8. B

15
 VII AUDIT OF LIABILITIES

CHECK FIGURES

PROBLEM NO. 1 Recognition and classification of liabilities

1. Total current liabilities P2,300,000

2. Total noncurrent liabilities P2,900,000

PROBLEM NO. 2 Classification of liabilities

1. Total current liabilities P3,938,000

2. Total noncurrent liabilities P1,960,000

PROBLEM NO. 3 Classification of liabilities

1. Total current liabilities P5,445,000

2. Total noncurrent liabilities P7,610,000

PROBLEM NO. 4 Audit of liability for premiums and warranties

1. Warranty expense P108,000

2. Estimated liability from warranties P80,000
3. Premium expense P 75,600
4. Inventory of AM/FM radio P56,950
5. Estimated liability for premiums P36,400

PROBLEM NO. 5 Audit of provisions and contingencies

1. Net amount to be recognized in profit or loss P240,000

2. Total current provisions P495,000
3. Total noncurrent provisions P120,000

PROBLEM NO. 6 Audit of bonds payable

(including preparation of adjusting journal entries

a. Adjusted balance of bonds payable as of December 31, 2012 P1,400,000

b. Unamortized bond premium on December 31, 2012 P56,000
c. The total bond interest expense for the year 2012 P182,900
d. The gain or loss on bond redemption P1,900 loss

16
PROBLEM NO. 7 Audit of bonds payable

1. Issue price of the 2,000 5-year bonds P2,155,534

2. Carrying amount of the 2,000 5-year bonds at December 31, 2011 P2,129,534
3. Gain on early retirement of bonds on December 31, 2012 P121,286
4. Equity component of the 6-year bonds P419,050
5. Increase share premium as a result of the conversion of the 1,500 6-yearP1,374,608

PROBLEM NO. 8 Convertible bonds payable

1. The proceeds allocated to the equity component P239,120

2. Carrying amount of the bonds at December 31, 2011 P3,849,120
3. Amount to be recognized in profit or loss as a result of the repurchase of the bonds
on January 1, 2012 P237,730
4. Decrease in equity as a result of the repurchase of the bonds on January 1, 2012
P 37,710
5. Amount to be recognized in profit or loss as a result of the amendment of the terms
on December 31, 2012 is P640,000

PROBLEM NO. 9 Audit of leases

1. Interest rate implicit in the lease 6%

2. Interest income to be recognized by the lessor for the fiscal period ended 30 June
2012 P28,591
3. Carrying amount of the finance lease receivable to be reported by the lessor at 30
June 2012 P355,105
4. Total lease-related expenses to be recognized by the lessee during the fiscal
period ended 30 June 2012 P172,522
5. Amount to be reported by the lessee under current liabilities as liability under
finance lease as of 30 June 2012 P130,296

PROBLEM NO. 10 Audit of leases

1. The interest rate implicit in the lease is 9%

2. Ignoring income taxes, if Jackie Corporation erroneously accounted for the
transaction as an operating lease, its profit for 2012 will be overstated by P478
3. The amount to be reported by Lessee Corporation under current liabilities as
liability under finance lease as of 31 December 2012 is P5,438
4. The depreciation amount to be recognized by Lessee Corporation for the year
ended 31 December 2012 is P5,971
5. Ignoring income taxes, if Lessee Corporation erroneously accounted for the
transaction as an operating lease, its profit for 2012 will be overstated by P 982

17
PROBLEM NO. 11 Audit of income taxes

1. Current tax expense P72,930

2. Current tax payable P19,430
3. Deferred tax liability P8,100
4. Deferred tax asset P8,730
5. Deferred tax expense (benefit) (P18,300)

PROBLEM NO. 12 Audit of income taxes

1. Current tax expense P6,030

2. Deferred tax liability P1,515
3. Deferred tax asset P6,750
4. Deferred tax expense (benefit) (P2,430)

PROBLEM NO. 13 Audit of long term liabilities

1. Total noncurrent liabilities as of December 31, 2012 P5,800,268

2. Current portion of long-term liabilities as of December 31, 2012 P1,445,372
3. Total interest expense for the year 2012 P712,640
4. Accrued interest payable as of December 31, 2012 P478,000

PROBLEM NO. 14 Audit of employee benefits

1. Short-term employee benefits P261,421

2. Other long term employee benefits Category A employees P34,148
3. Other long term employee benefits Category B employees P320,000
4. Other long term employee benefits Category C employees P239,659
5. Total provision for employee benefits P2,305,228

PROBLEM NO. 15 Theory

1. C 6. A 11. A 16. A
2. B 7. C 12. A 17. D
3. B 8. B 13. D 18. C
4. B 9. C 14. C 19. A
5. D 10. B 15. B 20. A

18
 VIII AUDIT OF EQUITY

CHECK FIGURES

PROBLEM NO. 1 Equity components

1. Total share premium P1,400,000

2. Contributed capital P4,960,000
3. Appropriated retained earnings P544,000
4. Total equity P6,640,000
5. Legal capital P3,680,000

PROBLEM NO. 2 Analysis of transactions affecting equity components

1. Share capital - preference shares P900,000

2. Share capital - ordinary shares P649,950
3. Share premium P2,158,800
4. Unappropriated retained earnings P3,451,250
5. Total equity P7,160,000

PROBLEM NO. 3 Audit of equity transactions and balances

(including preparation of adjusting journal entries)

a. Share capital P5 million

b. Share premium P1,155,000
c. Total retained earnings P3,382,500
d. Total equity P9,737,500

PROBLEM NO. 4 Audit of retained earnings

(including preparation of adjusting journal entries)

Correct amount of Retained Earnings P195,950

PROBLEM NO. 5 Audit of equity transactions and balances

(including preparation of adjusting journal entries)

Adjusted balance of retained earnings as of December 31, 2012 P249,300

Adjusted total equity as of December 31, 2012 P1,850,000

19
PROBLEM NO. 6 Audit of equity-settled share-based payment

Year Computation Comp. Exp. Cumulative

1 80 200 options P20 1/3 106,667 106,667
2 (85 300 options P20 2/3) P106,667 233,333 340,000
3 (86 300 options P20 3/3) P233,333 176,000 516,000

PROBLEM NO. 7 Audit of cash-settled share-based payment

Year Computation Expense Liability

1 405 100 SARs P14.40 1/3 194,400 194,400
2 400 100 SARs P15.50 2/3 - P194,400 218,933 413,333
3 253 100 SARs P18.20 3/3 - P413,333 47,127 460,460
150 100 SARs P15.00 225,000 272,127
4 113 100 SARs P21.40 - P460,460 (218,640) 241,820
140 100 SARs P20.00 280,000 61,360
5 0 - P241,820 (241,820) -
113 100 SARs P25.00 282,500 40,680

PROBLEM NO. 8 Audit of cash or equity-settled share-based payment

Year Computation Expense Equity Liability

1 Equity component (P7,600 1/3) 2,533 2,533
Liability component (1,000 P52 1/3) 17,333 17,333
Total 19,866 2,533 17,333
2 Equity component (P7,600 1/3) 2,533 2,533
Liability component [(1,000 P55 2/3)-P17,333] 19,334 19,334
Total 21,867 5,066 36,667
3 Equity component (P7,600 - P5,066) 2,534 2,534
Liability component [(1,000 P60 3/3)-P36,667] 23,333 23,333
Total 25,867 7,600 60,000
Scenario 1: cash of P60,000 paid (60,000)
Scenario 1 totals 67,600 7,600 -
Scenario 2: 1,200 shares issued 60,000 (60,000)
Scenario 2 totals 67,600 67,600 -

PROBLEM NO. 9 Book value per share

1. Book value per share of ordinary P224.78

2. Book value per share of ordinary, assuming the PS is participating P189.35

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PROBLEM NO. 10 Earnings per share

Basic earnings per share for 2012 P1.70

Diluted earnings per share for 2012 P1.62

PROBLEM NO. 11 Earnings per share

Basic earnings per share for 2012 P1.77

Diluted earnings per share for 2012 P1.72

PROBLEM NO. 12 Analysis equity transactions including EPS computation

1. Total share premium as of December 31, 2012 P4,333,000

2. Total retained earnings as of December 31, 2012 P501,000
3. Total equity as of December 31, 2012 P5,535,000
4. Basic earnings per share for the year 2012 P2.69
5. Diluted earnings per share for the year 2012 P2.25

PROBLEM NO. 13 Analysis equity transactions including EPS computation

1. Dividends paid to ordinary shareholders in 2012 P652,960

2. Retained earnings as of December 31, 2012 P1,884,800
3. Total equity as of December 31, 2012 P4,175,200
4. Basic earnings per share for 2011 P8.56
5. Basic earnings per share for 2012 P5.81

PROBLEM NO. 14 - Theory

1. A
2. A
3. D
4. B
5. B
6. C
7. D
8. A
9. D
10. A

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 IX COMPLETING THE AUDIT AND
AUDIT OF FINANCIAL STATEMENTS PRESENTATION

LETTER ANSWERS

PROBLEM NO. 1 PROBLEM NO. 6 PROBLEM NO. 11

1. A 1. B 1. A
2. D 2. A 2. A
3. B 3. D 3. B
4. A 4. C 4. A
5. D 5. D

PROBLEM NO. 2 PROBLEM NO. 7

1. A A PROBLEM NO. 12
2. C 1. D
2. D
PROBLEM NO. 8 3. C
PROBLEM NO. 3 1. C 4. A
1. B 2. B 5. C
2. D
3. A
4. A PROBLEM NO. 9 PROBLEM NO. 13
5. C 1. D 1. D
2. A 2. C
3. D 3. A
PROBLEM NO. 4 4. B 4. D
1. D 5. A 5. B
2. A
3. A
4. B PROBLEM NO. 10 PROBLEM NO. 14
5. C 1. B 1. C
2. A 2. C
3. C 3. C
PROBLEM NO. 5 4. A
1. C 5. D
2. D
3. D
4. B
5. A
6. D
7. A

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 XI SIMULATED BOARD EXAMINATIONS 1

LETTER ANSWERS

1. D 11. B 21. B 31. D 41. A

2. A 12. D 22. D 32. C 42. A
3. D 13. C 23. D 33. C 43. B
4. D 14. A 24. A 34. D 44. C
5. B 15. C 25. C 35. C 45. A
6. C 16. B 26. C 36. A 46. D
7. A 17. B 27. C 37. C 47. A
8. D 18. D 28. D 38. B 48. D
9. B 19. D 29. A 39. A 49. C
10. B 20. B 30. D 40. D 50. B

XI SIMULATED BOARD EXAMINATIONS 2

LETTER ANSWERS

1. B 11. A 21. B 31. B 41. A

2. A 12. B 22. A 32. C 42. D
3. C 13. C 23. A 33. D 43. A
4. C 14. D 24. D 34. D 44. B
5. D 15. A 25. C 35. D 45. C
6. B 16. D 26. C 36. B 46. D
7. C 17. D 27. B 37. C 47. C
8. A 18. D 28. D 38. B 48. B
9. D 19. A 29. B 39. D 49. C
10. B 20. C 30. A 40. D 50. B

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