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Re SA B42 AUD Final PB Exam Questions Answers Solutions Re SA B42 AUD Final PB Exam Questions Answers Solutions
Re SA B42 AUD Final PB Exam Questions Answers Solutions Re SA B42 AUD Final PB Exam Questions Answers Solutions
Re SA B42 AUD Final PB Exam Questions Answers Solutions Re SA B42 AUD Final PB Exam Questions Answers Solutions
ReSA
The Review School of Accountancy
Tel. No. 735-9807 & 734-3989
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following
questions. Mark only one answer for each item by shading the box
corresponding to the letter of your choice on the sheet provided.
STRICTLY NO ERASURES ARE ALLOWED. Use pencil no. 2 only.
2. Madrid's Bank has loaned money to Denver's Auto Supply. The loan is
collateralized by inventory. The loan also requires a CPA to observe
the count of the inventory and trace sampled items to the vendor
invoices in order to determine the value of inventory is not misstated.
This service would be
B a. an assurance service engagement. c. a review engagement.
b. an attestation engagement. d. A compilation engagement.
6. Evaluate the following cases with respect to the Code of Ethics for
Professional Accountants (Code):
I. Dodong Jonas, CPA (DJ), is the auditor of MCCC Wholesale, Inc. DJ
received a 10% commission from Computer Systems, Inc. for hardware
sold to MCCC Wholesale, Inc. The sale was made based on DJ's
recommendation to MCCC Wholesale that the company needed a new
accounting information system. DJ disclosed the commission to MCCC’s
management. DJ also performs an annual audit for MCCC.
II. Angkol, not a CPA, has a successful bookkeeping practice in Gensan.
He is charging relatively low service fees which resulted in having
more clients. In addition, it is his practice to give gratefulness
gift for successful referrals.
D a. Both Dodong and Angkol violated the Code.
b. Only Dodong violated the Code.
c. Only Angkol violated the Code.
d. Both Dodong and Angkol did not violate the Code.
Requirements:
36. What is the adjusted balance of inventories as of December 31, 2020?
A a. 268,400 c. 263,400
b. 255,300 d. 227,200
Solution:
PROBLEM 1: PHARMALLY CORPORATION
Accounts Accounts
Inventory Receivable Payable Net Income
PROBLEM 2:
You were assigned to audit the Property, Plant and Equipment of DOH
Corporation in line with your firm’s continuing engagement to audit its
financial statements as of and for the period ended December 31, 2020.
The following information were deemed relevant in line with your audit:
Accumulated
Balances as of 12/31/2019 Cost Depreciation
Land 1,600,000
Building 4,800,000 1,965,648
Machinery and Equipment 2,400,000 864,000
Automotive Equipment 1,600,000 1,371,429
Solution:
PROBLEM 2: DOH CORPORATION
41. Ans. D.
Depreciation - Building
Cost 900,000
Multiply by: Double declining rate based
Cost 600,000
Accum Depr. (1/1/2020) (600K*18/21) (514,286)
Additional Depr in 2020 (600K*2/21)*3/12 (14,286) 71,429
* PV of installment payments:
P600,000*2/21 (57,143)
Add: Correct depreciation for 3 mos. On old equpment
traded out
P600,000*2/21*3/12 14,286
Add: Depreciation for 9 months on new equipment
traded in
P920,000*6/21*9/12 197,143
Total 1,239,760
115,920
143,600
346,400
1,239,760 933,920
Adjustments
a) Sales 36,000
b) Sales 9,600
AR (Cuzi Co.) 9,600
Prorata allocation to installation services which is considered a separate
performance oblation contract
- unearned, until
Installation service (10,000/50,000)*48,000 9,600 installation completed
- valid sale upon
Merchandise sold (40,000/50,000)*48,000 38,400 delivery
c) Sales 40,000
Required
ADJUSTED AGING SCHEDULE: AR, Gross Allow. Allowance
More than 120 Days (August and earlier) 177,920 50% 88,960
933,920 107,416
48. Ans. C. 49. Ans. C.
50. Ans. A.
Total 226,016
Recoveries (24,800)
PROBLEM 4:
You were assigned to audit the cash account of Robredo Corp. in line with
your firm’s audit of its financial statements for the year ended December
31, 2020. The following resulted from your substantive test procedures:
BANK RECONCILIATION
PROBLEM 5:
In the course of your audit of Trillanes Inc.’s December 31, 2020
liabilities the following schedule was presented to you by Trillanes:
Accounts payable P225,000
Estimated premiums liability 320,750
Accrued salaries 960,000
Deferred tax liability ?
Total ?
Audit notes:
a. The accounts payable balance is net of a P35,000 advances made to a
supplier for merchandise to be delivered in 2021.
b. The company has a 2-year warranty on its products. The warranty
estimate is at 8% of the peso sales, two-thirds of which is expected
to be incurred during the year of sale and one-third on the year
following the year of sale. The summary of the company’s total
sales and actual warranty costs incurred for the past three years
are presented below (Assume sales were made evenly throughout the
year):
2018 2019 2020
Net Sales P4,000,000 4,525,000 5,275,000
Actual costs paid 127,500 233,750 285,250
Solution:
PROBLEM 5: TRILLANES INC.
56. Ans. B.
AJE 1:
Warranties Exp. 136,750
57. Ans. B
Balance 1,185
AJE 2:
Salaries Exp. 82,800
FTALE for the period (Excess tax depr. over financial) (250,000)
59. Ans. B
PROBLEM 6:
The shareholders’ equity section of Duque Company’s statement of
financial position as of December 31, 2019, is as follows:
2,000,000
Cash 720,000
Memo: From 52,000 ordinary shares issued to 208,000 ordinary shares issued;
7/1: From P100 par to P25 par value per share.
From 4,000 treasury shares to 16,000 treasury shares;
From P180 cost per share to P45 cost per share
PROBLEM 7:
You have been engaged to audit the accounts of Binaythere Company for the
first time in 2020. The company started operations in 2018. During the
audit you discovered the following information:
Year ending December 31,
2018 2019 2020
a. Unadjusted Net Income P520,000 P580,000 P710,000
b. Unrecorded year-end accrued utilities 22,000 19,000 15,000
expenses
c. Unrecorded year-end unused office 9,000 7,000
supplies
d. Year-end cash advances received for 14,000
rent to be earned the following year,
recognized as income upon collection
e. Ending inventory overstated as a
result of over counting items at 50,000 40,000
year-end.
f. Ending inventory understated as a
result of wrong pricing and 14,000 8,000
computational errors
g. Delivery of merchandise to customers
at year-end recorded as sales only
upon collection the following year 25,000 22,000
70. Ans. A.