Auditing and Assurance Concepts and Application – Long

Quiz
Perez, Rose Mae T. – BSA 3
PROBLEM 1:

ANSWER AND SOLUTION:

Compute for:
a. Cost of the patent upon initial recognition
= ₱ 558,000
b. Carrying value of the patent on December 31 2024
= ₱ 527,000

Cost of Patent (2024) 558,000

Useful life = 18 Years /18
Amortization 31,000

Cost of Patent (2024) 558,000

Less: Amortization (31,000)
Carrying Value (2024) 527,000

c. Carrying value of the patent on December 31 2028

= ₱ 787,500

Carrying Value of Patent, beg. (2025) 527,000

2025 Amortization (31,000)
2026 Amortization (31,000)
2027 Amortization (31,000)
Carrying Value of Patent, end (2027) 434,000
Add: Acquisition of related patent (1/1/2028) 406,000
Total 840,000
2028 Amortization 52,500
Carrying Value of Patent, (12/31/2028) 787,500

d. Carrying value of the patent on December 31 2030

= ₱ 1,065,442
 Carrying Value of Patent, beg. 2029 787,500
Acquisition of related patent (1/1/2029) 420,000
Total 1,207,500
2029 Amortization 71,029
2030 Amortization 71,029
Carrying Value of Patent, (12/31/2030) 1,065,442

e. Amount in total to be recognized in the P/L in 2031 in relation to the patent

= ₱ 994,413

Carrying Value of Patent, (12/31/2030) 1,065,442

2031 amortization 71,029
Carrying Value of Patent (2031) 994,413

PROBLEM 2:

Compute: what was the amount of shortage/overage on Sept 30, 2020?

ANSWER AND SOLUTION:

Currency and coins P 12,310

Unused Postage and documentary stamps 110
Checks payable to IMC Company:
9/20/20 IMC Surigao Corp 2,350
9/27/20 IMC Mae 1,960 4,310
Cash advance voucher paid out of receipts 1,500
Total per count P18, 230
Less: Cashier’s Accountability 18,470
CASH SHORTAGE P (240)

PROBLEM 3: Compute the following:

a. Collection of Sales

ANSWER AND SOLUTION:

Sales P1,615,040
 Less: Accounts receivable, 11/15 426,900
Collections from sales P 1,188,140

b. Payment for purchases

ANSWER AND SOLUTION:

Cost of sales (P1,615,040/1.4) P1,153,600

Add: Merchandise inventory, 11/15 469,600
Purchases 1,623,200
Less: Accounts payable, 11/15 231,420
Payments for purchases P1,391,780
c. Total Cash disbursements

ANSWER AND SOLUTION:

Purchase of real estate P1,000,000

Payment for furniture and fixtures
(P145,000-P30,000) 115,000
Expenses paid 303,780
Payments for purchases 1,391,780
Total cash disbursement P2,810,560

d. Unadjusted Cash balance

ANSWER AND SOLUTION:

Proceeds from issuance of common stock P1,600,000

Proceeds from mortgage note payable 400,000
Proceeds from notes payable-bank 160,000
Collections from sales 1,188,140
Total cash receipts 3,348,140
Less: Cash disbursement 2,810,560
Unadjusted cash balance P537,580

e. Cash Shortage

ANSWER AND SOLUTION:

Cash Accountability P537,580

Less: cash accounted (adjusted cash balance):
Unadjusted bank balance P131,640
 Deposit in transit 25,700
Outstanding checks (9,260) 148,080
Cash shortage P389,500

PROBLEM 4: Compute the following:

a. Capitalizable interest in 2020

ANSWER AND SOLUTION

b. Capitalizable interest in 2021

ANSWER AND SOLUTION:

c. Interest Expense in 2020

ANSWER AND SOLUTION:

d. Interest Expense in 2021

ANSWER AND SOLUTION:

e. Total cost of the building including interest capitalized in 2020 and 2021

ANSWER AND SOLUTION:

PROBLEM 5: Compute the following:

a. Depreciation expense for 2021 – Building

ANSWER AND SOLUTION:

 Book Value 1/1/2021 (P1,200,000-PP263,100) P936,900
Multiplied by: Declining rate (1/25x150%) ___6%__
Depreciation for the year P56,214

b. Depreciation expense for 2021 – Machinery and equipment

ANSWER AND SOLUTION:

Balance 1/1/2021 P900,000

Less: machine destroyed by fire 23,000
P 877,000
Divided by: 10 years P87,700
Dep’n of the machine destroyed by fire:
(P23,000/10x3/12) 575
Dep’n of the machine purchase for the year:
(P310,000/10x6/12) 15,500
Total depreciation P103,775

c. Depreciation expense for 2021 – Automotive equipment

ANSWER AND SOLUTION:

Depreciation on P115,000 balance, 1/1/2021 9,000

Less: depreciation on car traded in
(P9,000x2/10) 1,800
Adjusted depreciation on the beg. Bal. P14,400
Dep’n on the 1/2/2021 purchase:
(P12,000x4/10) 9,600
Total depreciation expense P24,000

d. Accumulated Depreciation as of Dec 31, 2021 – Building

ANSWER AND SOLUTION:

Book Value 1/1/2021 (P1,200,000-PP263,100) P936,900

Multiplied by: Declining rate (1/25x150%) ___6%__
Depreciation for the year P56,214
 Add: Accumulated depreciation 1/1/2021 263,100
Accumulated Depreciation- 12/31/2021 P319,314

e. Accumulated Depreciation as of Dec 31, 2021 – Machinery and equipment

ANSWER AND SOLUTION:

Balance 1/1/2021 P900,000

Less: machine destroyed by fire 23,000
P 877,000
Divided by: 10 years P87,700
Dep’n of the machine destroyed by fire:
(P23,000/10x3/12) 575
Dep’n of the machine purchase for the year:
(P310,000/10x6/12) 15,500
Total depreciation P103,775
Add: accumulated depreciation, 1/1/2021 250,000
Less: accumulated depreciation- destroyed by fire (11,500)
Accumulated depreciation- 12/31/2021 P342,275

f. Accumulated Depreciation as of Dec 31, 2021 – Automotive equipment

ANSWER AND SOLUTION:

Depreciation on P115,000 balance, 1/1/2021 9,000

Less: depreciation on car traded in
(P9,000x2/10) 1,800
Adjusted depreciation on the beg. Bal. P14,400
Dep’n on the 1/2/2021 purchase:
(P12,000x4/10) 9,600
Total depreciation expense P24,000
Add: accum. Depreciation, 1/1/2021 84,600
Less: accum. Dep’n- traded equipment (12,600)
Accumulated Depreciation, 12/31/2021 P96,000