Moreno, Eunice L.

BSA 3-A
AUDITING PROBLEM

AUDITING PROBLEM NO.1

1. Adjusted balance of retained earnings at the end of 2018, 2020 and 2021

2018 2019 2020 2021

Beginning Balance 0 854,500 1,162,950 806, 700
Add: Gain on retirement of preference share 0 518,100 (303,000) (316,800)
Less: Dividend paid 0 0 96,000 0
(Adjustment b) 0 (210,000) (150,000) (125,000)
Ending Balance 854,000 1,162,950 806,700 364,900

AUDITING PROBLEM NO.2

2. Adjusted net income for the year ended December 31, 2019 and 2021

2018 2019 2020 2021

Net Income 465,000 (307,500) (248,250)
Adjustments:
Accrued Income 8,400 9,300 11,700
Accrued Expense (9,300) (13,050) (14,250)
Depreciation Expense (33,750) (135,000)
Legal Fees to effect the ownership 45,000
Understatement of 2020 ending Inventory 51,000
Adjustment of 2021 (3,000)
Understatement of 2019 ending Inventory 54,000
Understatement of 2020 beginning Inventory (54,000)
Understatement of 2021 ending Inventory 72,000
Adjusted Net Income/ Loss 518,000 (303,000) (316,800)

AUDITING PROBLEM NO.3

Requirements: Compute the following:
1. Restated net income for 2020 as result of the change in policy.
Net Income (2019) 900,000 Net Income (2021) 929,000
Ending Inventory (165,000 – 150,000) 15,000 Ending Inventory 14,000
Restated Net Income ₱915,000 Beginning Inventory (11,000)
Restated Net Income ₱932,000
Net Income (2020) 845,000
Ending Inventory (156,000 – 145,000) 11,000
Beginning Inventory (15,000)
Restated Net Income ₱841,000
2. Adjusted net income for 2020 as result of the 3. Retroactive adjustment to the retained earnings
change in policy. beginning balance of 2021 as a result of this change.

Restated Net Income (2019) 915,000 Ending retained Earnings (FIFO) 1,745,000
Restated Net Income (2020) 841,000 Ending Retained Earnings (FIFO) 1,756,000
Restated Net Income (2021) 932,000 Beginning Retained Earnings (11,000)
Adjusted Net Income ₱2,688,000

AUDITING PROBLEM NO.4

2018 Straight-Line Method

Year Beginning Period Value Depreciation Expense Accumulated Depreciation End BV
1 50,000 9,000 9,000 41,000
2 41,000 9,000 18,000 32,000
Salvage Value – 50,000 x 10% = 5,000 Depreciation Expense per year = (50,000-5,000) = 9,000
5 years
Sum-of-years digit method
Year Dep. Base Rem. Life Dep. Fraction Dep. Exp Book Value
3 30,000 5 5/15 10,000 22,000
Salvage Value = 50,000 x 4% = 2,000

Double Declining Method

Year Beginning Period Value Depreciation Rate Dep. Exp. End BV Accumulated Depreciation
4 32,000 40% 12,800 19,200 12,800
Salvage Value = 50,000 x 4% = 2,000

2019 Straight-Line Method

Year Beginning Period Value Depreciation Expense Accumulated Depreciation End BV
1 40,000 7,200 7,200 32,800
Salvage Value = 40,000 x 10% = 4,000
Depreciation Expense per year = (40,000-4,000) = 7,200
5 years

Sum-of-years digit method

Year Dep. Base Rem. Life Dep. Fraction Dep. Expense Book Value
4 31,200 6 6/21 8,914 23,886
Salvage Value = 40,000 x 4% = 1,600
 Double Declining Method
Year Beg. Period Value Dep. Rate Dep. Exp. End BV Accumulated Depreciation
3 32,800 33.33% 10,933 21,867 10,933
Salvage Value = 40,000 x 4% = 1,600

AUDITING PROBLEM NO.5

Requirements: Compute for the following:
1. Gross Sales for the year

Cash Sales 1,400,000

Accounts Receivable, end 140,000
Notes Receivable- Trade Outstanding, end 90,000
Sales Discount 40,000
Sales Return- Credit memos 25,000
Sales Return- Cash 5,000
Accounts Write-Off 30,000
Total 1,730,000
Less:
Account Receivable, beg. 100,000
Notes Receivable- Trade Outstanding, beg 80,000
Cash Recoveries- Write-Off 10,000
Gross Sales 1,540,000

2. Net Sales for the year

Gross Sales 1,540,000
Less:
Sales Discount 40,000
Sales Return- Credit memos 25,000
Sales Return- Cash 5,000
Net Sales 1,470,000

1. Uncollectible accounts were P 21,000 and P35,000 at the beginning and at the end of the year

Account Write-off 30,000

Balance, end 35,000 65,000
Less:
Balance, beg. 21,000
Recoveries 10,000 31,000
Bad Debts Expense 34,000
 AUDITING PROBLEM NO.6
Requirement: Compute for the following under the accrual method.
1. Gross purchase for the year

Cash 1,250,000
Purchases on Account
Accounts Payable, end 108,000
Notes Payable- Trade, end 42,000
Purchase Discounts 45,000
Purchase Return- Credit Memos 55,000
Purchase Return- Cash 25,000
Total 275,000
Less;
Accounts Payable, beg. 75,000
Notes Payable-Trade, beg. 57,000 143,000
Total Purchase 1,393,000

2. Cost of Goods Sold for the year

Merchandise Inventories, beg. 189,000

Purchases 1,393,000
Less:
Merchandise Inventories 243,000
Cost of Goods Sold 1,339,000