ReżSA

7he keview School uf Accountancy

B”Te!. No. 7J ź- 9807 b 7ź4-3989

AUDFWNGPROI3LEMS
IRENEO/ESPENILLA

Ą O_ T @g _ł¿O \}ggECTIONS,CASH/ACCRUAL and SINGLE ENTRY

ERRC/2 cGfłRECTłON
PRGBLFN 1:Yuu were er›gaqedfoi the frst Firm to audit the financial statements of Yoda Corporation for
the ye•ar ended December 31, 3017. The t ompany started its oPeratIons ”In 2015. In reviewing the
books, you r/‹scovered that certain tran sactioi›s/add.i• r.ments ha‹J either been overlooked or
improperly recorded at t łi c ‹•nd of the years ?015 to 2017. Oin .sginns/ fat luresad rr rg@r_gą r
m ąmri

December ł
2015 2016 2017

3,000 6.000 4,000

1.000" 3,000
5 OOO 4,000
8000 _- ’3000
10,000„
7,000
4. Delivery of merchandise at vear n‹,' to cu •to iners, recorded as sales
upon collectlon the fo owing ear.35,000 ”’ 60,000
5 Receipt of merchandise at Year-erid, recorded as purchases upon payment tł›e foliowing year.
..ż. 8 OOO .23‹.-000
43,0O0 35,000
7. received Łhe
foIlow›ns yea‹›recorded as purcha es uyori p.zyment. 22,000 1. 1,000
8/Órganization costs inc»red › tłze ntart-u¿ ul tle bus ness at the
beginnirig of 2015 was caoitałized as ao int.ao9i61•- r›sset .aiid20,000
accordin I amortized over a eriud nt twu Y r•rs.

5,000 12,000
outright expenses. The company rlepreciates equ\ument at J0^/o per annumt depreciation in the year cf the expenditure is apt 5 •.

The compan'y s books also revealed the lottery nfni”mation:

I’ 20t3 " “ ?.016”
P235,+0U P69 J.,000
Dividends declared an—d distriburerl 3«'›,0U0 S86,00G
I t0-,00fI 130,0g0
Required:Compute for the foIIow‹nq :
1. Adjusted QFDfits for 2015 an‹t
2. Adjusted accumulated prof›ts »alances at thc• erid of 20ż6 and 2017
3. Net effects of Łhe errors bn the 20•!i‹ and ?O16 working Kapitał
4. Set misstatement in total assets at the end of 20) 7
S. Net misstatement in total tiab4‹ties •t ' 1e end of 2015

PROBLEN 3:You are aud ting the financial roternents uf Clerk tnc. for Ehe year 2017.The details of
the company’s Accumulated Proht accoun•., before any adjustments, are as follows

Oate
01.01. 20łS ¢r« it . 8ąl0ncc ;
, 12.31. 2015 ' Balance ! 570,0U0 /
01.3t 2016 i Net loss for the year 70,uOO [00,000
D‹vioends paid 210,OOO 2900(m

‹
04.30 2016, Paid in Capital ‹n egress .•f par 135,000 , 43SQ00
08.31 2016 iq grt retirement of preference ' 90,0Q0 S15,000
ł3.3 ł 3016 get income for the year 750,000 1,J6S,0U0
01.31 2017 ( D viderids p6›d 150,000 1, ł 1.5,000
ł2 31, Net łoss for the y ar , ż4S,250 86b,7S0
2017
Yum c xoo inatinn rJisclnsed the fr›l!uwii›q .

Accrued income lí,700 0,300 8,400 7,050

Prepayments
Total I J, 100 - 12,750
P' 1,Ÿ* 0 P20,4UO P8,400 P19,600
Un earnc•d
incon›e łü,400 - ł 1,700
Accrued expenses 14 ż50 13 050 9 300 8 10O
Total P20,6 ß PJ 3,050 P21,000 P8, î00

D. Dividends had been Je. clared n ?‹a› ï and in żû16 but were not recorded until pa‹d the fófłowing year.
Oividends declared in December 2† 17 tout pairł and recorded only in 2018 amounted to P150,000.

c. The com pa• Y ‹ ec+wed tra ›spoit a:•oo equipment a> donation from a stockholder on March 31. 2014.
As of the date of donation, the epuipmrnt has a remaining useful life of 3 years and a fair value of
P240,0OO. The only entry made at the •Jate of the donation was expensing Pt5,000, which was the
fee paid to effect the tra‹isfer of 4›'znvrsFiip.

d. Merchandise inventor iescostlng P5 ł,ûu0 aud f*4H,D00 were in transit from a supplier at the end of
2015 and 2016, respectively.These were purchased under FOB shipping point and the goods were
excluded from the pbysico ł count rnad‹• at the rnd of each vear. The purchases; however, were
recorded the immecliate follo•wing y••a•, ugeii recc p: of the complete purchase invoice documents.

e. merchandise inventorics wirh *.aleS in Juice prices of P70,000 and PJ40,000 were in transit to
customers at the end of 2015 anc› ü417, her.pectiveIy. these goods, Old aL 3O•A gross profit
based on salęs, sold under FOB Destination, were recort1c•:1 as salrs m 20 ł S and 20 ł 7, respectively.
Since goods have already been physically delivered us of the co«nt date, these goods were no longer
included in the physical count of that particular year.

Requirements: Compute for the following :

1. Accumulated profit as of December 31, ?013, ï015 and 2017 2,

Pröfit{LoMț for tbe years ended Dec.ember 11 2U14 and 2016
3. Net adjustments to working ‹apitaI, Dece•z›oer 31, 2016.
4. Net adjustments to total liabilities, Decemoer "î, 201?
5. Net adjustments to tutal asscFs, Dc‹ember 31, 20L›^.

ACCOCllvTlfJG CHANGES

PROBLEM 3: Łora Co. has been using the FIFO rr‹etrioo of inveritory costing since it began operations in
2014. Net income reported for each year under *this costing method had been as follows:

2014
2015
2016

tn 2016 the company decided to ‹:hatige th« inventory cost formulato the weighted average methad. The
following are the December 31 inventory balances under each method:

FIFO
Weiqhted Average
2014 180,000
2015 158,00O 2lo,o00
i 83,000
2016 195,000
20 . 9Pc

Requirøments: Compute fnr the fóllcw› zg"

ț. Restated neF income tor 2015 as a result cf the• change in poI‹cy
2. Adjusted profit for 2016 as e matt of the change in policy
3. Retroamve adjustment to rhe accumulated prof ts heq›nr»ng balance of20I6 as a result of
th‹s change
PROBL EM ê: 8n9ht Company purchased the following eq•»pment at the beqinnłng of each year:
2013»0,eL*0

AUÒFŃŃĞ PÀ@BŁEŃS - 6AÈCH 37

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