AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

Problem 1 – Audit of Cash & Cash Equivalent B. P166,236 D. P179,748

Questions 1 thru 4 are based on the following information.
In connection with the audit of MONDAY Company's financial statements, you obtained the
following information pertaining to its cash account.
Cash in bank
July 31 136,429 Book disbursements- August 111,423
Book receipts- August 141,230 August 31 balance 166,236
Further examination revealed the following:
 The cash receipts book in August was underfooted by P10,000.
 Included in the book receipts in August is a note collected by the bank in July for P1,500.
 July NSF checks of P526 and bank service charges of P50 were recorded by the Company in
August.
 The bank statement in August showed total debits of PI 10,098, total credits of PI 49,951, and
an ending balance of P 180,413.
 Among the bank debits are:
NSF checks P 700
Bank error 900
Correction of July error" 1,000
Service charges 65
 Among the bank credits are:
Correction of July error P600
Note collected by bank 4,277
Bank error 3.000
 Deposits in transit: July 31, P5,200; Aug. 31, 8,330
 Outstanding checks as of July 31, P8,007.

Determine the following:

1. Cash Shortage
A. P4,000 C. P5,474
B. P4,526 D. P6,026

2. Outstanding checks, August 31

A. P3,876 C. P9,332
B. P8,007 D. P11,421

3. Adjusted cash Balance, August. 31

A. P125,841 C. P169,748
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AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

4. Adjusted cash balance, July 31 5. The cash shortage as of March 31 is:

A. P111,612 C. P137,353 A. P 0 C. P5.35
B. P136,429 D. P148,481 B. P1.80 D. P7.15

Problem 2 – Audit of Cash & Cash Equivalent 6. The amount of deposit in transit as of March 31 is:
Questions 5 thru 6 are based on the following information. A. P0 C. P1,504.40
During the first quarter of 2001 the Young Corporation entered into the following transactions. B. P595.60 D. P2,100
Jan 1 Acquired 150 shares of Block Corporation common stock for P20 per share, 200 shares of
Bridle Corporation common stock for P30 per share, and 100 shares of Alpha Corporation Problem 3 – Audit of Cash & Cash Equivalent
common stock for P25 per share. These are the only shares the company owns and all Questions 7 thru 11 are based on the following information.
are classified as securities available for sale. The ROBIN CORPORATION engaged your services to audit its accounts. In your examination of
Feb 1 Purchased 12% A Company bonds with a face value of P20,000 at par, plus accrued cash, you find that the cash account represents both cash on hand and cash in bank. You further
interest. Interest on the bonds is payable February 28 and August 31 each year, and the noted that there is a very poor internal control of cash.
bonds are due August 31, 2004. Also purchased 10% B Company bonds with a face
value of P12,000 at par, plus accrued interest. Interest on the bonds is payable March 31 Your audit covers the period ended June 30, 2005. You started the audit July 15. Upon cash count
and September 30, and the bonds are due September 30, 2007. These arc the only on this date, cash on hand amounted to P4,800. Examination of the cash book and other evidence
bonds the company owns and all are classified as securities available for sale. of transactions disclosed the following:
Feb 1 Established a petty cash fund for incidental expenditures at P500
Feb 28 Received the semiannual interest on the A Company bonds. 1. July collections per duplicate receipts, P18,800.
Feb 28 A count of cash on hand indicated that P125.50 remained in the petty cash fund. A sorting
of petty cash vouchers disclosed that P110 was spent for postage, P170.65 was spent for 2. Total of duplicate deposit slips, all dated July, P11,000, includes a deposit representing
office supplies, P45.00 was spent for transportation, and P43.50 was spent or collections of June 30.
miscellaneous items. The fund was replenished.
Mar 31 Received first quarter dividends of P1,500 and the semiannual interest on the B Company 3. Cash book balance at June 30, 2005 is P46,500, representing both cash on hand and cash in
bonds. On this date, the aggregate fair value of Young's securities available for sale is bank.
P42,600.
Mar 31 A count of cash on hand indicated that P230.50 remained in the petty cash fund. A sorting 4. Bank statement for June shows a balance of P42,400
of petty cash vouchers disclosed that P140.00 was spent for postage, P75.30 was spent
for office supplies, and P52.40 was spent for miscellaneous items. The fund was 5. Outstanding checks at June 30: May checks, No. 183 for P450, and No. 198 for P1,650; June
replenished. checks, No. 205 for P600, No. 254 for P400, No. 280 for P5,000, No. 302 for P900, and No.
The bank statement and the accounting records of the Young Corporation for the month of March 317 for P2,500
2001 indicated that the cash collected from the dividends and the B Company bond interest was
deposited on March 31 but did not appear on the March bank statement. There were no other 6. Undeposited collections at June 30, P5,000
deposits in transit. The bank statement showed a balance on March 31 of P13,459.75, which
included collection of a P1,500 note and P100 of interest by the bank for the Young Corporation. 7. An amount of P900 representing proceeds of a clean draft on a customer was credited by
Also listed was a P20 bank service charge and a P75.60 NSF check returned by the bank. The bank, but is not yet taken up in the company’s books.
cash balance per the accounting records on March 31 was P11,689.95, which included checks
totaling P2,365.40 that had not yet cleared the bank. 8. Bank service charges for June, P100.
January 16, 2005 Page 2 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

Accounts receivable
The company cashier presented to you the following reconciliation statement for June, 2005 which B. Receivable from custodian D. Bank service charges
he has prepared: Bank charges Receivable from custodian
Cash in bank Cash in bank
Balance per books, June 30, 2005 P45,600 Accounts receivable Accounts receivable
Add: Outstanding checks:
No. 205 P 600 Problem. 4 – Audit of Receivables
254 400 Questions 12 & 13 are based on the following information.
280 500 The 2005 audit of the accounting records of the Ranney Company discloses the following
302 700 information:
317 1,500 3,600
Total P49,200 2004 2005
Less: Bank Charges (100) Accounts receivable (ending) P186,000 P187,100
Undeposited Collections (5,100) Allowance for doubtful accounts (ending) 7,400 7,000
Balance per bank, June 30, 2005 P44,000 Allowance for sales returns and allowances (ending) 4,700 3,916
Gross sales returns and allowances (estimated for the year) 4,900 5,200
Based on the above data, answer the following: Accounts receivable written off during the year 6,800 7,900
Actual gross sales returns and allowances for the year 4,700 6,000
7. What is the amount of cash shortage as of June 30, 2005? Sales discounts not taken at end of year 0 400
A. P6,600 C. P10,500 Credit sales during the year (terms, 2/10, n/60) 375,000 380,000
B. P9,800 D. P11,400 Cash collected on accounts receivable during the year
(net of discounts taken) 352,000 367,500
8. What is the correct cash balance that should be reported in the balance sheet on June 30, Based on the above data, answer the following:
2005?
A. P24,500 C. P43,800 12. The adjusting entry to record the 2005 bad debt expense will include:
B. P35,900 D. P47,300 A. A credit of P 400 to bad debt expense
B. A debit of P 7,500 to bad debt expense
9. What is the amount of shortage in July 2005? C. A debit of P 6,400 to bad debts expense
A. P3,000 C. P12,800 D. A debit of P 8,500 to bad debts expense
B. P8,000 D. P14,000
13. The correct accounts receivable balance at December 31, 2005 is:
10. How much is the total accountability of the cashier as of June 30, 2005? A. P177,520 C. P187,100
A. P40,700 C. P47,300 B. P185,120 D. P198,016
B. P43,800 D. P52,100
Problem 5 – Audit of Inventories
11. What is the pro-forma correcting entry needed on June 30, 2005? Questions 9 and 10 are based on the following information.
A. Bank charges B. Receivable from custodian
Cash in bank Cash in bank
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AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

The CARR Corporation manufactures a highly flammable product. On June 30, 2005 a fire Purchase returns and allowances 23,060 32,300
completely destroyed its factory and all the work in process inventory therein. However, some Sales 394,000 418,000
records were saved which showed the following inventory balances as of June 30, 2005. Sales returns and allowances 8,000 10,000
Raw materials P60,000 On Jan. 1, 2005, the Company's pricing policy was changed so that the gross profit rate would be
Finished goods 120,000 three percentage points higher than the one earned in 2004.
And as of January 1, 2005 the inventories were as follows: Salvage undamaged merchandise was marked to sell at P12,000, while damaged merchandise
Raw materials 30,000 marked to sell at P8,000 had an estimated realizable value of P1,800.
Work in Process 100,000
Finished goods 140,000 Based on the above data, determine the following:
A review of the records showed that sales and gross profit fort the past five years are as follows:
Sales Gross Profit 16. Gross profit rate in 2004
2000 P 300,000 P 80,000 A. 8% C. 18%
2001 320,000 100,000 B. 12% D. 21%
2002 330,000 100,000
2003 270,000 80,000 17. Gross profit rate in 2005
2004 280,000 90,000 A. 11% C. 21%
B. 15% D. 24%
Sales for the first six months of 2005 were P300,000. Raw material purchases were P100,000.
18. Cost of goods sold for the year ended Dec. 31, 2005
Freight on purchase was P20,000. Direct labor for the six months was P80,000. For the past five
A. P310,080 C. P346,800
years manufacturing overhead was 50 percent of direct labor cost.
B. P322,320 D. P363,120
14. Compute the average gross profit rate for the 5 year period.
19. Inventory, December 31, 2005, before the fire
A. 25% C. 30%
A. P52,580 C. P93,380
B. 28% D. 32%
B. P68,900 D. P105,620
15. What was the value of the work in process inventory as of June 30, 2005?
20. Inventory loss due to flood
A. P 80,000 C. P120,000
A. P85,620 C. P91,820
B. P100,000 D. P140,000
B. P88,500 D. P94,700
Problem 6 – Audit of Inventories
Problem 7 – Audit of Investment
Questions 16 thru 20 are based on the following information.
Questions 21 thru 25 are based on the following information.
The Seattle Corporation was organized on Jan. 1, 2004. On Dec. 31, 2005, the Company lost most
The Company started investing its surplus cash during 2003 and the entries relating thereto were
of its inventory in a flood just before the year-end count of inventory was to take place. Data from
recorded under the investment account. The ledger details are reproduced below.
the records disclosed the following:
2-01 CV Investment in Ace P 120,000 2-28 CR ACE Co. P 10,000
2004 2005 Co. - 500 shares
Beginning inventory, Jan. 1, P0 P 52,000 2-20 CV Investment in Kris 150,000 3-01 CR Sale of Kris
Purchases 380,000 396,000 Co. - 600 shares Co. - 200
January 16, 2005 Page 4 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

shares 45,000 B. P109,090 D. P110,909

4-30 JV Receipt of ACE stock 9-15 CR Sale of ACE
dividend - offsetting stocks - 400 Problem 8 – Audit of Investment
credit to retained shares 98,000 Questions 26 thru 29 are based on the following information.
earnings 11,000 During your initial audit of the KIM CORPORATION for the year ended December 31, 2004, you
10-12 CR Sale of ACE acquire the following evidence and data relative to your examination of investment in bonds
stocks -100 account.
shares 23,000
10 25 Cash Dividend December 31, 2002 Paid a total of P190,000 to acquire 200, P1,000 par value bonds. These
ACE Co. 4,500 bonds are dated May 1, 2001 and are due May 1, 2011. Interest
payable semi-annually, May 1 and November 1.
From the Philippine Stock Exchange, the ACE dividends were analyzed as follows: May 1, 2003 Received interest of 12,000.
Dates November 1, 2003 Received interest of 12,000.
Kind Declared Record Payment Rate May 1, 2004 Received interest of P12,000
Cash 01-12 02-15 02-28 P20/share September 1, 2004 Paid a total of P39,600 to acquire 40 bonds.
Stock 04-01 04-20 04-30 10% November 1, 2004 Received interest of P14,400.
Cash 09-01 09-30 10-10 P30/share
Required: Compute the adjusted balances of the following accounts on December 31, 2004:
REQUIRED: Compute the following:
26. Carrying value of bond investment
A. P224,000 C. P227,460
21. Gain or loss on sale of KRIS shares
B. P226,867 D. P230,500
A. P0 C. P5,000 loss
B. P5,000 gain D. P10,000 gain
27. Interest receivable
A. P4,800 C. P14,400
22. Gain or loss on sale of 400 shares of ACE stocks
B. P6,000 D. P28,800
A. P1,273 loss C. P10,727 gain
B. P6,000 gain D. P18,000 gain
28. Interest income in 2004.
A. P23,820 C. P27,380
23. Gain or loss on sale of 100 shares of ACE stocks
B. P25,600 D. P29,060
A. P1,000 loss C. P1,182 gain
B. P1,000 gain D. P2,000 gain
29. The cost of the bond investment acquired on September 1, 2004
A. P38,000 C. P40,000
24. Dividend Income.
B. P39,600 D. P42,000
A. P16,500 C. 15,000
B. P26,500 D. P23,500
Problem 9 – Audit of Property Plant & Equipment
Questions 30 thru 35 are based on the following information.
25. Adjusted balance of the Investment account at the end of the year.
A. P100,000 C. P110,000
January 16, 2005 Page 5 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

As the first auditor of the Sunaga Company you discover that the following entries have 32. The 2004 depreciation expense was:
been made in the property, plant and equipment account: A. correctly stated C. overstated by P1,523
B. overstated by P1,497 D. overstated by P1,579
Property, Plant, and Equipment
2003 2003 33. The gain or loss on machine disposal was:
Plant purchased P 60,000 Depreciation P 6,310 A. P100 gain C. P 300 loss
Legal fees 700 B. P100 loss D. P140 loss
Insurance 2,400
2004 2004 34. The adjusted balance of Machinery account at December 31, 2005 is:
Repairs 2,000 Depreciation 6,879 A. P30,200 C. P30,780
Addition to Building 10,000 B. P30,480 D. P31,280
2005 2005
Repairs 3,000 Machine sold 500 35. The carrying value of the building at December 31, 2005 is:
Insurance 2,800 Depreciation 7,421 A. P39,457 C. P39,600
Machine purchased 7,000 B. P39,547 D. P39,904

You discover the following additional information: Problem 10 – Audit of Property Plant & Equipment
1. The purchase of the plant included a building and machinery. When the plant was purchased, Questions 36 thru 40 are based on the following information.
an appraisal showed that the building was valued at P39,000 and the machinery at P26,000. The following account balances were included in the balance sheet of the Bromley Company on
2. Depreciation has been recorded each year at 10% of the balance in the account. The 10% December 31,2004:
was chosen because the property is being depreciated over 10 years for tax purposes. Land 100,000
Subsequent investigation indicates that the expected lives at the time of acquisition were: Land improvements 20,000
Building, 20 years; machinery, 8 years. Buildings 300,000
3. Each insurance payment was made on January 1 and was for a 2-year policy. Machinery and equipment 500,000
4. The machine that was sold in 2005 had an original cost of P800.
5. All purchases and sales of property, plant, and equipment items occurred at the beginning of During 2005 the following transactions occurred:
the year indicated. 1. Land was acquired for P70,000 for a future building site, Commissions of P4,000 were paid to
a real estate agent.
30. The costs of the building and machinery acquired in 2003 should be 2. A factory and land were acquired form the Kent Development Company by issuing 20,000
shares of P3 par common stock. At that time the stock was selling for P10 per share on the
A. B. C. D.
Philippine Stock Exchange. The independently appraised values of the land and the factory
Building P36,000 P36,420 P36,700 P39,000 were P60,000 and P180,000, respectively.
Machinery P24,000 P24,280 P24,000 P26,000 3. Machinery and equipment was acquired at a cost of P120,000. In addition, sales tax, freight
costs, and installation costs were P7,000, P10,000 and P16,000, respectively. During
31. The 2003 depreciation expense was: installation, the machinery was damaged and P2,000 was spent in repairs.
A. correctly stated C. overstated by P1,510 4. A new parking lot was installed at a cost of P30,000
B. overstated by P1,454 D. understated by P1,510 5. A machine that had cost P20,000 on January 1, 2001 and had a book value on December 31,
2005 of P4,000 was sold on that date for P6,000
January 16, 2005 Page 6 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

6. Half the land purchased in item 1 was prepared as a building site. Costs of P26,000 were Depreciation expense 800 understated 2,500 overstated
incurred to clear the land, and the timber recovered was sold for P3,000. A new building was Based on the above information, answer the following questions:
built for P60,000 plus architect's fees and imputed interest on equity funds used during
construction of P18,000 and P15,000, respectively. No debt is outstanding. 41. Assume that the proper correcting entries were made at December 31, 2004. By how much
7. Costs of P20,000 were incurred to improve some leased office space. The lease will terminate will 2005 income before income taxes be overstated or understated
in 2007 and is not expected to be renewed. A. P200 understated C. P2,700 understated
8. A group of new machines was purchased under a royalty agreement that provides for payment B. P500 overstated D. P3,200 understated
of annual royalties based on units produced. The invoice price of the machines was P30,000,
freight costs were P2,000, and royalty payments for 2005 were P12,000. 42. Assume that no correcting entries were made at December 31, 2004 or December 31, 2005.
Ignoring income taxes, what is the effect of the above errors on the net income of 2006?
Compute the adjusted balances of the following accounts at December 31, 2005. A. P1,000 overstated C. P1,700 understated
B. P1,000 understated D. No effect
36. Land
A. P110,000 C. P116,000 43. Assume that no correcting entries were made at December 31, 2004 or December 31, 2005.
B. P113,000 D. P120,000 Ignoring income taxes, by how much will retained earnings at December 31, 2005 be
overstated or understated?
37. Land Improvements A. P200 understated C. P2,700 understated
A. P20,000 C. P40,000 B. P500 overstated D. P3,200 understated
B. P30,000 D. P50,000
44. Assume that no correcting entries were made at December 31, 2004 or December 31, 2005
38. Building and that no additional errors occurred in 2006. Ignoring income taxes, by how much will
A. P228,000 C. P243,000 working capital at December 31, 2006 be misstated?
B. P230,000 D. P245,000 A. P1,700 understated C. P500 overstated
B. P0 D. P1,000 overstated
39. Leasehold improvements
A. P 0 C. P30,000 45. The pro-forma correcting entry in 2006 assuming the books of 2004 and 2005 have already
B. P20,000 D. P50,000 been closed is:
A. Retained Earnings C. Accumulated depreciation
40. Machinery and equipment Accumulated depreciation Cost of sales
A. P163,000 C. P175,000 Retained earnings
B. P165,000 D. P177,000 B. Accumulated depreciation D. No entry
Retained earnings
Problem 11 – Correction of Error
Questions 41 thru 45 are based on the following information. Problem 12 – Correction of Error
RHEA Inc. is a calendar year corporation. Its financial statements for the years 2004 and 2005 Questions 46 thru 50 are based on the following information.
contained errors as follows: DAIMLER, Inc., does not maintain adequate accounting records. Your were engaged to audit the
2005 2004 2005 financial statements and upon analysis, you found the following errors.
Ending inventory P1,000 understated P3,000 overstated
January 16, 2005 Page 7 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

A. The bookkeeper inadvertently failed to record a cash receipt of P10,000 on the sale of Utilities payable 32,000 . Retained earnings 25,000
merchandise in 2005 Utilities payable 32,000

B. Utilities payable at the end of 2004 of P25,000 and at the end of 2003 of P32,000 were not 50. The adjusting entry to establish the allowance for doubtful accounts at the end of 2005 is:
recorded. A. Bad debt expense 31,000 C. Bad debt expense 22,000
Allow. for bad debts 31,000 Allow. for bad debts 22,000
C. The Company failed to recognize the unexpired rent at the end of 2004 and 2005 amounting to B. Bad debt expense 5,000 D. Retained earnings 27,000
P4,000 and P6,000 respectively. Retained earnings 17,000 Allow. for bad debts 22,000
Allow. for bad debts 22,000 Bad debt expense 5,000
D. The Company uses the direct-write of method of accounting for bad debts. In 2005, the
Company decided to set-up an allowance for the estimated uncollectible accounts as of Problem 13 – Comprehensive Problem
December 31, 2005 for 2004 accounts of P7,000, and for 2005 accounts of P15,000. It has Questions 51 thru 70 are based on the following information.
also decided to correct the charge against each year so that it shows the losses (actual and You have been engaged to examine the financial statements of MULAN Corporation for the year
estimated) relating to that year’s sales. Accounts have been written off to bad debts expense ended December 31, 2005. Your working trial balance (WTB) shows the following accounts,
as follows: among others:
Cash 210,000 Sales 1,740,000
In 2004 In 2005 Accounts Receivable 410,000 Operating expenses 630,000
2004 accounts 4,000 20,000 Allowance for bad debts- Other income 15,000
2005 accounts 16,000 credit bal. 35,000
Prepaid expenses 25,000 Other expenses 9,000
46. What is the effect on 2005 net income of the failure to record cash receipts from customer? Other receivable 15,000 Net income 350,000
A. P10,000 overstated C. P20,000 understated Inventory 525,000
B. P10,000 understated D. no effect Accounts payable and
accrued exp. 145,000
47. What is the net effect on retained earnings at the end of 2005 of the Company’s failure to Customers’ credit balance
establish unexpired rent at the end of 2004 and 2005? -
A. P2,000 overstated C. P6,000 understated Unearned revenue -
B. P2,000 understated D. no effect Current portion of LTD -
Loans payable 1,5000,000
48. How much is the correct bad debts expense in 2005? Long term debt (LTD) 400,000
A. P16,000 C. P36,000 Capital stocks 1,225,000
B. P31,000 D. P38,000 Additional paid-in capital
95,000
49. What is the entry to correct the effect of the omission of accrued utilities?
A. Utilities expense 32,000 C Utilities expense 25,000 During your examination, you obtained the following information:
Utilities payable 32,000 . Retained earnings 7,000
Utilities payable 32,000 A. On December 31, 2005, a check of P5,000 from an account customer was recorded in the
B. Retained earnings 32,000 D Utilities expense 7,000 books by a credit to sales.
January 16, 2005 Page 8 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

A. P192,500 C. P215,000
B. A P10,000 collection from a customer on account was received on December 27, 2005. This B. P200,000 D. P225,000
was not recorded until it was deposited in the bank on January 2006.
52. The audited accounts receivable balance at December 31, 2005 is
C. A check of P5,000 representing payment of a minor repair of equipment was not recorded in A. P402,000 C. P417,000
the books. B. P412,000 D. P445,000

D. An examination of account receivable trial balance furnished by the client revealed the 53. The audited allowance for bad debts at December 31, 2005 is
following: A. P27,000 C. P42,000
Customer’s accounts with debit balances P425,000 B. P35,000 D. P42,200
Customer’s accounts with credit balances (15,000)
Total per general ledger 410,000 54. The net realizable value of accounts receivable at December 31, 2005 is:
A. P360,000 C. P374,800
E. After discussing uncollectible accounts with the credit manager, it was agreed that an overdue B. P370,000 D. P410,000
customer’s account of P8,000 should be written-off. Per aging schedule, the allowance for bad
debts should have a balance of P42,000. 55. The audited balance of prepaid expenses at December 31, 2005 is:
A. P25,000 C. P31,000
F. The inventory is determined by a physical count conducted every December 31. B. P30,000 D. P37,000

G. Included in merchandise inventory account are goods costing P12,000 which were received on 56. The audited balance of merchandise inventory at December 31, 2005 is:
consignment but recorded like a regular purchase on account. A. P510,000 C. P525,000
B. P513,000 D. P540,000
H. The company failed to record sales of P10,000 on account made near the end of 2005. The
sale was recorded in 2006 when cash was collected. 57. The audited balance of other receivables at December 31, 2005 is:
A. P15,000 C. P25,100
I. During the year, the Company received P12,000 representing one year advance rental B. P25,000 D. P35,000
effective June 1, 2005. No adjustment has yet been booked as of year-end
58. The audited balance of accounts payable and accrued expenses at December 31, 2005 is:
J. 200 shares of stocks having a par value of P150 per share were issued for P35,000 on A. P133,000 C. P147,500
January 14, 2005. The entire proceeds were credited to the common stock account. B. P135,500 D. P150,500

K. Payment of one year insurance premium amounting to P18,000 was debited to expense in 59. The audited balance of customers’ credit account at December 31, 2005 is:
2005. Inspection of the policy revealed that the insurance ends on August 31, 2006. A. P0 C. P15,000
B. P10,000 D. P25,000
L. Long-term debt is payable in semi-annual installments of P20,000 every March 1 and
September 1. 60. The audited balance of unearned revenue at December 31, 2005 is:
A. P0 C. P7,000
51. The audited cash balance at December 31, 2005 is: B. P5,000 D. P12,000
January 16, 2005 Page 9 of 10
AUDITING PROBLEM Accountancy Center in Education First & Final Pre-board Examination

70. If the client accepts all adjusting entries proposed by the auditor, the audit report on these
61. The audited balance of current portion of long-term debt at December 31, 2005 is financial statements would most probably contain what type of opinion?
A. P12,000 C. P40,000 A. Adverse opinion C. Qualified
B. P20,000 D. P60,000 B. Disclaimer D. Unqualified

62. The audited balance of long-term debt of December 31, 2005 is: Answer Key
A. P340,000 C. P380,000 1. B 11. B 21. C 31. B 41. A 51. C 61. C
B. P360,000 D. P400,000 2. D 12. B 22. B 32. B 42. A 52. B 62. B
3. D 13. A 23. D 33. B 43. C 53. C 63. A
63. The audited balance of capital stocks at December 31, 2005 is: 4. C 14. C 24. A 34. B 44. B 54. B 64. C
A. P1,220,000 C. P1,225,000 5. D 15. C 25. C 35. D 45. C 55. D 65. B
B. P1,222,000 D. P1,230,000 6. D 16. D 26. C 36. A 46. B 56. B 66. B
7. D 17. D 27. A 37. B 47. C 57. A 67. B
64. The audited balance of additional paid-in capital as of December 31, 2005 is: 8. B 18. A 28. C 38. A 48. B 58. A 68. B
A. P90,000 C. P100,000 9. B 19. D 29. A 39. B 49. D 59. C 69. A
B. P95,000 D. P105,000 10. C 20. D 30. B 40. B 50. D 60. B 70. D
65. The audited balance of sales at December 31, 2005 is:
A. P1,740,000 C. P1,750,000
B. P1,745,000 D. P1,760,000

66. The audited balance of operating expenses at December 31, 2005 is:
A. P605,000 C. P645,500
B. P638,000 D. P657,500

67. The audited balance of other income at December 31, 2005 is:
A. P8,000 C. P15,000
B. P10,000 D. P20,000

68. The audited balance of other expenses at December 31, 2005 is:
A. P1,000 C. P19,000
B. P9,000 D. P19,500

69. The audited net income in 2005 is:

A. P342,000 C. P928,000
B. P362,000 D. P1,108,000

January 16, 2005 Page 10 of 10