AP Quiz 1 (B46)

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY AP QUIZ 1
CPA Review Batch 46  October 2023 CPA Licensure Examination
AUDITING PRACTICE S. IRENEO  G. MACARIOLA  C. ESPENILLA  J. BINALUYO
1. In relation to you audit of Startrek Corp’s cash balances, you traced bank transfers for the last part of the audit
period and first part of the subsequent period. The audit objective in rendering this procedure is to detect
whether ___________. This is relevant to gather evidence regarding __________ assertion over cash.
a. the cash receipts journal was held open for a few days after the year end; existence.
b. cash balances were overstated because of kiting; existence.
c. the last checks recorded before the year and were actually mailed by the year end;
completeness.
d. any unusual payments to or receipts from related parties occurred; completeness.
PROBLEM 1:
In relation to your audit of cash balances of your client, Starwars Corp. for the period ended December 31, 2023, the
client’s accountant provided the following information from its bank transfer schedule. Further investigation revealed
that checks are dated and issued on December 30, 2023.
Disbursement Date Receipt Date
Check Bank Accounts Per Per Per Per
No. From To Books Bank Books Bank
101 FEB TC PNB Dec. 30 Jan. 4 Dec. 30 Jan. 3
202 PCIB MBTC Jan. 3 Jan. 2 Dec. 30 Dec. 31
303 PNB CBC Dec. 31 Jan. 3 Jan. 2 Jan. 2
404 MBTC BPI Jan. 2 Jan. 2 Jan. 2 Dec. 31
2. Which of the following checks might indicate kiting?

a. #101 and #303.
b. #202 and #404.
c. #101 and #404.
d. #202 and #303.
3. Which of the following checks overstates the overall cash balance per books at December 31, 2024?
a. #101 and #202.
b. #202 only
c. #202 and #303.
d. #303 only.
4. Which specific Bank accounts are overstated as per your audit?
a. PCIB and MBTC
b. CBC and BPI
c. MBTC and BPI
d. CBC and MBTC
PROBLEM 2:
Your cash count of the petty cash fund having an imprest balance of P30,000, of Equinox Corp. in line with your audit
of its financial statements for the period ended December 31, 2023 resulted to the following information:
Cash count date: January 4, 2024
Currencies and coins P12,100
Petty cash expense vouchers:
Date Particulars
12/26 Transportation 1,200
12/27 Office repairs 900
12/29 Office supplies 1,300
1/2 Gasoline and oil 600
1/3 Representation expenses 1,300
Checks:
Date Maker
12/20 Ace Corp., customer 8,400
12/26 June Cook, officer 4,500
12/27 Charlie Inc., customer 12,000
12/28 Equinox Corp. payable to the custodian 9,000
12/30 Beta Corp., customer* 6,000
*Marked NSF by the bank
Page 1 of 19 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AP QUIZ 1
CASH AND CASH EQUIVALENTS, RECEIVABLES, AND INVENTORIES
Audit note: The undeposited collection which included cash and check collections, was also under the custody of
the petty cash custodian. Investigation revealed that the total undeposited collections as of the count date per
records was at P22,500.
Required:
5. What is the petty cash shortage or overage as a result of your cash count?
a. 4,800
b. 2,100
c. 1,200
d. 800
6. What is the adjusted balance of the petty cash fund as of December 31, 2023?
a. 26,600
b. 24,400
c. 22,200
d. 25,400
PROBLEM 3:
Information regarding Shogun Corp. cash balance details about transactions for the month of December revealed the
following information:
A. Undeposited collections and outstanding checks by the end of November were at P216,500 and P129,800,
respectively. These items cleared the bank in December.
B. The bank erroneously credited Shogun Corp.’s account in November for a check deposit of Showgone Co.
amounting to P89,000. This was corrected by the bank in December.
C. Proceeds of a bank loan in November amounting to P200,000 appeared as one of November bank credits
not yet recorded by the company by the end of November. Bank service charges and customer NSF check
amounting to P2,100 and P25,500 were among the November bank debits. Book reconciling items were
recorded in the books in December.
D. A November P125,000 disbursement was recorded in the books at P12,500. The correct amount which
cleared the bank in November was at P125,000. The error was discovered and corrected in the books in
December.
E. Depositor’s note receivable collected by the bank in December on the company’s behalf amounted to
P140,000. Bank loan and interest payments automatically charged against the company’s account in
December amounted to P21,000 (the amount includes P1,000 interest).
F. The bank erroneously charged the company P12,000 for a December disbursement check of another
company. This error was discovered and corrected by the bank in December.
G. A customer collection check amounting to P85,000 was recorded in the books in December at P58,000. The
error is yet to be corrected by the company as at month end.
H. A December customer NSF check amounting to P5,000 was returned and redeposited in December. As this
will have no effect on the cash balance, the company did not record the return and redeposit anymore in its
books.
I. The December unadjusted balance per bank statement was at P994,200 while the December unadjusted
balance per the general ledger was at P980,000.
J. Total Book debits and credits amounted to P8,956,000 and P8,735,000, respectively. Total Bank debits and
credits amounted to P8,658,000 and P8,831,000, respectively.
Required:
7. What is the correct undeposited collection as at the end of December?
a. 325,500
b. 320,500
c. 313,500
d. 298,500
8. What is the correct outstanding checks as at the end of December?
a. 188,700
b. 181,700
c. 193,700
d. 195,800
9. What is the correct cash balance as of November 30?

a. 821,200
b. 759,000
c. 907,900
d. 818,900

10. Lee, CPA is engaged in audit of Snort Internet Corp., an internet provider which services a rural community.
The receivable balances are relatively small, and customers are billed monthly. As a result of his evaluation
of internal control, he concluded that the controls of interest are effective. To determine the validity of
accounts receivable balances at the balance sheet date, Lee, CPA would most likely _____________, this is
relevant to his audit objective to gather evidence regarding __________ assertion over receivables.
a. Send positive confirmation requests; valuation
b. Send negative confirmation requests; existence
c. Examine evidence of subsequent cash receipts instead of sending confirmation requests; valuation
d. Use statistical sampling instead of sending confirmation request; existence
11. Returns of positive confirmation requests for accounts receivable were very poor. As an alternative
procedure, the auditor decided to check subsequent collections. The auditor had satisfied himself that the
client satisfactorily listed the customer name next to each check listed on the deposit slip; hence, he decided
that for each customer for which a confirmation was not received that he would add all amounts shown for
that customer on each validated deposit slip for the two months following the balance sheet date. The major
fault in the auditor’s procedure is that”:
a. Checking of subsequent collection is not an accepted alternative auditing procedure for
confirmation of accounts receivable
b. By looking only at the deposit slip the auditor would not know if the payments was for the
receivable at the balance sheet date or a subsequent transaction
c. The deposit slip would not be received directly by the auditor as a confirmation would be
d. A customer may not have made a payment during the two-month period.
12. As a result of your understanding of the client internal control over its Order to Cash Business Process
(Formerly, Revenue and Receipt Cycle), you have noted that there might be possible instances of unbilled
deliveries to customers since the billing department is not keen in monitoring the prenumbering of the
delivery receipt in preparing sales invoices to be sent to customers. An effective procedure to test for these
suspected unbilled shipments is to _________. This is to support the financial statement assertion of __________
over sales and receivables.
a. Vouch sales journal entries to shipping documents; existence/occurrence.
b. Trace shipping documents to the sales journal; completeness.
c. Vouch sales journal entries to the accounts receivable subsidiary ledger; existence/occurrence.
d. Trace sales journal to the general ledger sales account; completeness.
PROBLEM 4:
The following receivable reconciliation was provided by Overlord Corp.’s accountant as part of your examination of
its receivable account balance as of December 31, 2023:
Balance per General Ledger 2,940,000

SI dated December 20 for goods delivered on December 20 FOB Destination (29,000)
SI dated December 30 for goods delivered on December 31 FOB Shipping Point,
goods still in transit as of December 31 (52,000)
SI dated October 11, where customer returned goods as there were errors in the
items delivered. Investigation revealed that credit memos were approved and
recorded only in January the following year. 25,000
OR dated December 29 for a customer collection check dated January 2, 2024 92,000
OR dated December 30 for a customer collection check dated December 30, 2023 85,000
Receivables deemed worthless (SI dated April 20) 24,000
Receivables deemed worthless (SI dated September 20) (30,000)
Balance per Subsidiary Ledger 3,055,000
*SI = Sales Invoice
OR = Official Receipt
There were no other write-off of receivables during the year. A P31,400 previously written off account was
recovered during the year. The January 1, 2024 balance of the allowance for bad debt amounted to P154,200. An
aging of accounts receivable schedule along with the managements estimate of collectability appears below:
Age Amount % of collectability
1-60 days 916,500 99%
61-120 days 1,222,000 95%
121-180 days 611,000 90%
More than 180 days 305,500 80%

Required:
13. What is the adjusted accounts receivable balance gross of any allowances?
a. 3,032,000
b. 2,972,000
c. 3,002,000
d. 3,054,000
14. What is the correct amortized cost of accounts receivable as of December 31?
a. 2,800,625
b. 2,815,125
c. 2,813,225
d. 2,815,625
15. What is the correct bad debt expense for the year?
a. 54,775
b. 24,775
c. 30,775
d. 78,775
PROBLEM 5:
You were assigned to audit the accounts receivable balance of your financial statements audit client Orochi Corp.
for the period ended December 31, 2023. The balance of the accounts receivable per the general ledger and the
corresponding year-end allowance for bad debts amounted to P2,910,000 and P215,200, respectively. The
accountant of the client furnished you the following receivable aging schedule based on its subsidiary ledger:
Age Amount % uncollectible
Current (1-60 days) 1,178,400 -
1-60 days past due 736,500 5%
61-120 days past due 589,200 10%
More than 120 days past 441,900 25%
due
The following are the exceptions noted as a result of you’re the confirmation letters sent to selected customers:
Customer Amount Customer’s Reply Remarks
Moderna Co. P125,000 Amount is ok. We will remit the The amount is the selling price 50
amount due (less 10% agreed units of products delivered on
commission) upon selling the consignment. The company
goods. As of December 31, only recorded the delivery in December
20 units had been sold. as usual sales, debiting receivables
and crediting sales at the said sales
price.
Blazing Corp. 210,000 The amount is for an invoice The amount was overlooked when
dated October 11. The agreed preparing the sales invoice. The
purchase order price per unit is approved price should have been
at P2,500. The invoice price per P2,500.
unit was P3,000.
Venom Inc. 120,000 The invoice dated August 20 Credit Memo number 211 covering
amounting to P40,000 should the said return was appropriately
have been offset by a return of recorded in the general books but
merchandise in September. were overlooked in posting the
transactions to the subsidiary
ledgers.
Saber Corp. 98,000 No reply for 2 sets of Management agreed to write-off
confirmation letters these receivables as worthless. The
account is more than 120 days past
due.
Required:
16. What is the unlocated difference between GL and SL as a result of your audit?
a. None
b. 4,000
c. 36,000
d. 44,000

17. What is the correct amortized cost of accounts receivable as of December 31?
a. 2,512,970
b. 2,573,030
c. 2,517,030
d. 2,547,970
18. What is the correct bad debt expense for the year?
a. 39,230
b. 97,970
c. 93.230
d. 58,770
19. Which of the following is the best audit procedure for the discovery of damaged merchandise in a client’s
ending inventory and which financial statements assertion over inventories would be affected by such
discovery?
a. Compare the physical quantities of slow-moving items with corresponding quantities in the prior-
year; Valuation
b. Observe merchandise and raw materials during the client’s physical inventory taking; Valuation
c. Review the management’s inventory representation letter for accuracy; completeness
d. Test overall fairness of inventory values by comparing the company’s turnover ratio with the
industry average; existence
PROBLEM 6:
In line with your audit of Zodiac Distributions Inc.’s inventories as of the period ended December 31, 2023, you decided
to render cut-off procedures on its recorded sales and purchases. The physical count of the goods which resulted to
P312,000, was rendered on December 29, 2023. As a result all goods delivered on or before December 29 were
excluded from the count and all goods received on or before December 29 were included in the physical count.
A. PURCHASES CUT-OFF
DECEMBER PURCHASE JOURNAL ENTRIES
Receiving Receipt Date Amount Remarks
Report #
21291 Dec. 26 P5,300 FOB Shipping point
21292 Dec. 27 4,600 FOB Destination – Received from consignor
21293 Dec. 28 8,000 FOB Buyer
21295 Dec. 29 7,200 Free Alongside the Vessel
21296 Dec. 30 5,500 FOB Destination
JANUARY PURCHASE JOURNAL ENTRIES

Receiving Receipt Date Amount Remarks
Report #
21298 Jan. 2 4,600 FOB Destination – Goods in-transit as of Dec. 31
21299 Jan. 2 8,000 FOB Seller – Goods in transit as of Dec. 31
21300 Jan. 3 5,500 Purchased under “Bill and Hold” Agreement executed in
December
Note that receiving report number 21294 were for goods costing P6,200 received on December 29. The sales invoice
of the suppliers is yet to be received by the client, thus it yet to be recorded in the purchases journal.
B. SALES CUT-OFF
DECEMBER SALES JOURNAL ENTRIES
Sales Delivery Date Amount Remarks
Invoice #
52285 Dec. 28 12,000 FOB Destination – Goods still in-transit as of Dec. 31
52286 Dec. 29 15,000 Goods delivered on a “Sale with repurchase agreement”
52287 Dec. 30 16,000 Free Alongside the Vessel – Goods still in-transit as of Dec.
31
52288 Dec. 30 20,000 FOB Destination

JANUARY SALES JOURNAL ENTRIES

Sales Delivery Date Amount Remarks
Invoice #
52289 Dec. 31 P10,000 FOB Buyer – Goods still in-transit as of Dec. 31
52290 Dec. 31 8,000 FOB Shipping Point – Goods still in-transit as of Dec. 31
52291 Dec. 31 14,000 FOB Seller – Goods still in transit as of Dec. 31
52292 Jan. 3 18,000 Sold under “Bill and Hold” Agreement executed in
December
Note that Sales Invoice number 52286 covering a sale with repurchase agreement requires the company to
repurchase the goods at the same selling price three months later, plus 10% interest on the amount. Gross profit based
on all sales is at 40%.
Required:
20. What is the adjusted balance of the inventories as a result of your audit?
a. 302,300
b. 308,500
c. 296,800
d. 297,000
21. What is the net adjustment to accounts payable?

a. 20,400 credit
b. 25,000 credit
c. 14,200 credit
d. 4,600 debit
22. What is the net adjustment to accounts receivable?

a. 1,000 debit
b. 5,000 credit
c. 13,000 debit
d. 1,000 credit
PROBLEM 7:
Rockwell Co. maintains records under the periodic method and rendered physical count of inventories on December
31, 2023. Only goods that are physically with the company on the said count date were included in the physical
count which amounted to P345,000. This was then set-up by the client as part of its closing entries at year-end. As
part of your substantive analytical procedures however, you gathered the following information:
December 31, 2022 Inventories (traced to prior year’s working papers) P390,000
Payments to suppliers of inventories for the year 3,945,000
Purchase discounts taken on purchases 210,000
Purchase returns and allowances on purchases (all done before payments) 385,000
Normal spoilages (at sales price) 200,000
Abnormal spoilages (at cost) 120,000
Sales for the year 5,620,000
Sales discounts (taken by customers) 450,000
Special discounts granted to employees and officers 220,000
Sales returns 300,000
Sales allowance 124,000
Accounts payable, December 31, 2022 275,000
Accounts receivable, December 31, 2022 320,000
Accounts payable, December 31, 2023 310,000
Accounts receivable, December 31, 2023 254,000
Audit notes: Sales included the delivery to a customer in Baguio City on December 30, 2023. The goods which
were invoiced at P180,000 were still in-transit as of the balance sheet date. Freight term is FOB Baguio City.
23. What is the accrual basis gross purchases for the year?
a. 3,980,000
b. 4,190,000
c. 4,365,000
d. 4,575,000

24. Assuming Gross Profit is 30% based on sales, what is the estimated ending inventory as a result of your audit?
a. 498,000
b. 232,000
c. 512,000
d. 358,000
25. Assuming Gross profit is 60% based on cost, what is the estimated inventory shortage as a result of your
audit?
a. 304,000
b. 113,000
c. 317,500
d. 457,500
PROBLEM 8
The following comprises Cash and Cash Equivalents account details of Antiope Inc.’s for the period ended
December 31, 2022:
Current account at Bank of the Philippine Islands P6,000,000

(P200,000 of the amount is compensating balance for a 2-year
loans payable to the bank due December 31, 2023. The entity is not
legally restricted from withdrawing the balance as per the
agreement with the bank)
Current account at Equitable PCI Bank (300,000)
(Overdrafts are repayable on demand and forms an integral part
of the entity’s cash management policy)
Payroll account 1,500,000
Foreign bank account – restricted (in USD) ** 60,000
Postage stamps 3,000
An officer’s post-dated check 12,000
Bank drafts 30,000
Credit memo from a vendor for a purchase return 60,000
Traveler’s check 150,000
Customer’s not-sufficient-funds check 45,000
Money orders 90,000
Petty cash fund (P10,200 in currencies, P2,100 in employee check 30,000
dated January 3, 2023 and expense vouchers for P16,500)
Treasury bills, due 3/31/23 (purchased 11/30/22) 600,000
Treasury bills, due 1/31/23 (purchased 10/31/22) 900,000
Redeemable preference shares, mandatory redemption date
3/31/2023 (acquired 3/31/2022) 100,000
Change fund 10,000
Bond sinking fund 1,000,000
**current exchange rate as of December 31, 2022 is at P55 for every USD1.
26. What is the correct cash and cash equivalent to be reported by the company in its December 31, 2022 balance
sheet?
a. 8.390,200 c. 8,490,200
b. 8,392,300 d. 8,472,300
PROBLEM 9:
The following information resulted from a count of Hippolyta Corp.’s cash on hand was conducted on January 3,
2023 in relation to the audit of the entity’s financial statements for the period ended December 31, 2022:
a. Custodian’s accountability was petty cash fund with an imprest balance of P15,000 and undeposited
collections from December 27, 2022 to the date of count appearing in the cash records at P72,000.
b. The items on hand on the count date were:

Currencies and coins P32,800

Checks:
Date Payor Payee
12/10 ABC Corp. – Customer Hippolyta Corp. 20,000*
12/27 E. James – Employee Hippolyta Corp. 2,000
12/28 DEF Co. – Customer Hippolyta Corp. 12,000
12/29 Hippolyta Corp. Marawi Co. – Supplier 15,000
1/2 XYS Co – Customer Hippolyta Corp. 32,000
1/4 UVW Inc. – Customer Hippolyta Corp. 19,000
*returned by the bank marked NSF
Petty cash expense vouchers:
Date Particulars Amount
12/28 Office repairs 2,100
12/28 Postage stamps 3,000
12/29 Officers’ meals 2,500
1/2 Gas and oil 2,000
Employee IOUs 1,500
Unused postage stamps 2,500
Petty cash receipt vouchers:
Date Particulars Amount
12/29 Employee contributions for charity 3,200
12/30 Return of travel expense advance 500
Requirements:
27. What is the cash shortage/overage as a result from the cash count?
a. None c. 4,500
b. 2,900 d. 800
28. What is the adjusted petty cash fund balance as of December 31, 2022?
a. 3,100 c. 6,800
b. 5,100 d. 1,400
PROBLEM 10:
You are auditing the cash in bank balance of Etta Co. in line with your firm’s audit of the entity’s financial statement
as of and for the period ended December 31, 2022. The following information are deemed relevant in your audit:
a. The bank statement for the month of December had the following information:
December 1, balance 2,580,000
Total bank credits 9,650,000
Total bank debits 8,990,000
December 31, balance ?
b. The November bank reconciliation statement prepared by the client included the following reconciling
items. November book reconciling items were eventually recorded in the books where necessary in
December.
• A note receivable amounting to P220,000 was collected by the bank in November on the
company’s behalf. Interest on the note which was also collected by the bank was at P22,000.
• Total bank service charge for the month of November was P9,600.
• A collection check amounting to P90,000 was returned by the bank together with the November
bank statement and was marked NSF.
• Deposits in transit and outstanding checks by the end of November were at P520,000 and
P920,000, respectively.
• The company recorded a disbursement check at P125,000 in November. The November bank
statement showed the check clearing the bank at the correct amount which was P152,000. The
error was subsequently corrected by the company in December.
c. Audit examination revealed the following December items:
• Deposits in transit and outstanding checks amounted to P786,000 and P889,000, respectively.
• The bank erroneously credited the company P120,000 for a customer collection of Atta Corp. The
bank discovered and immediately corrected the error in December.
• Bank also erroneously charged the company P86,000. The same has not been corrected however
by month end.

• Bank loan proceeds automatically credited to the company’s account by the end of December was
at P500,000. This has not been recorded in the books yet.
• A P80,000 customer check was returned by the bank in December marked NSF. The company
redeposited the same check in December upon notifying the customer and has since cleared the
bank also in December. The company did not record the checks return and redeposit anymore since
the same will have no effect to the cash balance.
• Bank service charge for the month of December was at P12,400.
d. The general ledger shows the following balances:
Requirements:
29. What is the correct cash in bank balance as of December 31, 2022?
a. 3,051,000 c. 3,223,000
b. 3,240,000 d. 3,137,000
30. What is the total cash debits appearing the company’s books for the month of December?
a. 9,538,000 c. 9,796,000
b. 9,578,000 d. 9,458,000
31. What is the total cash credits appearing the company’s books for the month of December?
a. 8,993,600 c. 8,753,000
b. 8,532,800 d. 8,787,200
32. Which of the following will least likely appear in an audit program for the audit of cash in bank accounts?
a. Verifying items listed as deposit in transit in the client-prepared bank reconciliation statement have
been processed as deposits on the cutoff bank statement as these should appear chronologically
on the cut-off bank statement.
b. Determining whether checks processed in the cut-off bank statement with dates after year-end,
appears as outstanding checks in the client-prepared bank reconciliation statement.
c. Confirmation with the bank regarding cash balances and liabilities to the bank.
d. Preparing schedule of interbank transfers to verify that both sides of the transfer are property
accounted for and to detect any kiting.
PROBLEM 11:
In the course of your audit of Steve Company’s “Receivables” account as of December 31, 2022, you found out that
the account comprised the following items:
Trade accounts receivable P1,550,000
Trade accounts receivable, assigned (proceeds from assignment 750,000
amounted to P650,000)
Trade accounts receivable, factored (proceeds from factoring done 300,000
on a without-recourse basis amounted to P250,000
Trade notes receivable 200,000
Trade notes receivable, discounted (proceeds from discounting done 100,000
on a with-recourse basis amounted to P80,000, Recourse obligation
is considered significant)
Trade receivables rendered worthless 50,000
Installments receivable, normally due 1 year to two years 250,000
Customers’ accounts reporting credit balances arising from sales 60,000
returns
Customers’ accounts reporting credit balances arising from advance 40,000
payments
Cash advances to associate company 800,000
Claims from shipping company for damaged goods while in-transit 30,000
Subscriptions receivable due in 60 days 400,000
Deposits on long term contract bids 200,000
Requirements:
33. How much is the total trade receivables?
a. 3,150,000 c. 3,050,000
b. 2,850,000 d. 2,750,000

34. How much is the amount to be presented as “trade and other receivables” under current assets section of
the statement of financial position?
a. 3,380,000 c. 3,280,000
b. 3,480,000 d. 4,280,000
PROBLEM 12:
The accountant of James Corp. presented the following reconciliation in line with your audit of the company’s
receivables for the period ended December 31, 2022:
Balance per General Ledger P2,910,000
Invoice price of goods delivered on December 29. Received by the (80,000)
customer on December 31. Freight Term: FOB Buyer
Invoice price of goods delivered on December 30. Goods still in transit as (50,000)
of December 31. Freight term: FOB Destination
Invoice price of goods delivered on December 31. Goods still in transit as 75,000
of December 31. Freight term: FOB Shipping Point
Customer collection check dated November 30, in payment of an Invoice (120,000)
dated October 20, returned by the bank marked NSF
Customer collection check dated December 30, in payment of an Invoice 60,000
dated November 20
Customer collection check dated January 3, in payment of an invoice 90,000
Dated December 10
Credit memo for sales returns on sales invoice dated August 4 20,000
Preference shares subscriptions receivable, Due March 3, 2024 (250,000)
Write-off of worthless accounts (Sales invoice dates April 10 – P44,000; 76,000
July 20 – P32,000)
Balance per Subsidiary Ledger P2,731,000
Audit notes:
a. The accountant also prepared the following aging schedule based on the subsidiary ledger and inquiries
also revealed their estimation policy regarding the portion estimated to be doubtful of collection:
Age Amount % Doubtful of collection
Current (1-60 days) P1,120,000 2%
1-60 days past due (61-120 days) 650,000 10%
61-120 days past due (121-180 days) 520,000 20%
More than 120 days past due (>180 days) 441,000 40%
b. The company sell under terms 5/20, n/60. The company further estimates per past experience that 25% of
the accounts that are current (1-60 days) will probably be collected within the discount period.
c. The allowance for bad debts had a January 1, 2022 balance of P302,800. The company had a P46,000
recovery of previously written-off accounts during the year. There were write-off of accounts receivable
during the year other than that which appears in the reconciliation schedule.
Requirements:
35. What is the correct cash accounts receivable balance, gross of any allowances?
a. 2,795,000 c. 2,775,000
b. 2,990,000 d. 2,790,000
36. What is the correct amortized cost of accounts receivable as of December 31, 2022?
a. 2,424,550 c. 2,422,800
b. 2,440,550 d. 2,408,550
37. What is the correct bad debt expense for 2022?

a. 79,400 c. 75,400
b. 83,400 d. 67,400
38. Which of the following is the least concern of the auditor when auditing possible overstatement error on
receivables?
a. Ascertaining whether the billing department monitors the prenumbering of the delivery receipt
when preparing sales invoices.
b. Determining whether sales invoices are being reviewed and approved by other than the preparer of
the invoice to check on accuracy of the prepared invoices.

c. Determining that sales invoices are being prepared based on approved sales order and delivery
receipts and whether the documents are in agreement before preparing the sales invoice.
d. Determining whether entries in daily sales summary and sales journals corresponds to sales
invoices, delivery receipts and sales orders which are all in agreement.
PROBLEM 13:
The following aging schedule based on accounts receivable subsidiary ledger has been prepared by the accountant
of Trevor Corp. in line with your audit of its financial statement for the period ended December 31, 2022:
Age Amount % Collectability
Current (1-60 days) P2,240,000 99%
1-60 days past due (61-120 days) 870,000 95
61-120 days past due (121-180 days) 740,000 80
More than 120 days past due (>180 days) 646,000 50
Audit notes:
a. A credit balance in one of the customer’s account amounting to P20,000 is included in the current (1-60
days) account. This resulted from the customer cash advance for a delivery to be made in 2023.
b. Another credit balance amounting to P28,000 resulting from a collection of a previously written-off
account is included in the current (1-60 days) account. Investigation revealed that the client failed to
reverse the write-off entry upon recovery and recorded only the cash collection.
c. The unadjusted December 31, 2022 balance of the allowance for bad debts was at P452,000.
d. The following exceptions were noted as a result of your accounts receivable confirmation procedures:
Customer Amount Exception noted
per Books
Diana Inc. P160,000 The customer claims the correct amount is P120,000. The
difference was for an invoice dated September 15 priced at
P160 per unit whereas the agreement per Sales Order was
at P120 per unit. Client acknowledges the invoice error.
Prince Co. 220,000 The customer claims the correct amount is at P195,000. The
difference was for a credit memo issued in December for a
sales returns in December. The goods return was covered
by a sales invoice originally dated August 24. Investigation
revealed that the credit memo was recorded in January
2023.
Steve Co. 250,000 The customer claims that the amount is the total selling
price of goods they receive on consignment from Trevor
Corp. in December. Steve Co. further reports that 40% of
these goods remained unsold. Commission rate as agreed
upon between parties was at 12% of the sales price. The
client acknowledges the customer’s report.
Barbra Inc. 60,000 No reply has been received from this customer even with
the second confirmation request sent. There has been no
evidence of subsequent collections either. The client admits
receivable are worthless. Further investigation revealed that
outstanding invoices to this customer were all dated April
2022.
Minerva Co. 120,000 The customer claims no amount owing to the client as the
customer has advanced P280,000 cash to the client in
December for all deliveries to be made in December and
January. Investigation revealed that the P120,000
outstanding balance per books was for a delivery made in
December. The cash advance was recorded by the entity as
Cash Sales in December. Client acknowledges the error.
Requirements:
39. What is the correct cash accounts receivable balance, gross of any allowances?
a. 4,199,000 c. 4,137,000
b. 4,181,000 d. 4,149,000
40. What is the correct amortized cost of accounts receivable as of December 31, 2022?
a. 3,678,250 c. 3,683,000
b. 3,700,820 d. 3,801,800

41. What is the correct bad debt expense for 2022?

a. 78,000 c. 46,000
b. 18,000 d. 106,000
42. Which of the following is incorrect regarding the use of confirmation letters in auditing receivables?
a. Confirmation of receivables is consistent with the auditor’s objective of gathering evidence
regarding the receivables existence/occurrence.
b. Positive confirmation requests is necessary where the auditor expects based on past experience
that there will be many exceptions.
c. Negative confirmation requests may be used by the auditor where control risk assessment is placed
at less than high level.
d. If no response is received to a negative confirmation letter, the auditor should send a second
confirmation request and perform alternative procedures if still no response is received.
PROBLEM 14:
The following accounts were lifted form the unadjusted trial balance of Penny Corp. as of December 31, 2022:
Cash P963,200
Accounts receivables 2,254,000
Inventory 6,050,000
Accounts payable 4,201,000
During your audit, you noted that Penny Corp. held its cash books open after year end. In addition, your audit
revealed the following information:
a. Receipts for January 2023 of P654,600 were recorded in December 2022 cash receipts journal. The
receipts of P360,100 represent cash sales and P294,500 represent collections of receivables from
customers, net of 5% cash discount.
b. Accounts payable of P372,400 was paid in January 2023. The payments, on which discounts of P12,400
were taken, were included in the December 2022 check register.
c. Merchandise inventory resulted from a physical count conduced on December 30, 2022. The following
information has been discovered relating to certain inventory transactions.
• Goods invoiced at P275,000 were shipped on consignment to a customer on December 28 and was
recorded as sales on account. Cost goods was at P210,000.
• Goods costing P216,000 were received from a vendor on January 4, 2023. The related invoice was
received and recorded on January 6, 2023. The goods were shipped on December 31, 2022, terms
FOB shipping point.
• Goods with the sales invoice price of P637,500 were shipped and recorded on December 31, 2022,
and were received by the customer on January 3, 2023. The terms of the invoice were FOB
shipping point. The goods costing P520,000 were included in the 2022 ending inventory physical
count on December 30.
Requirements: Based on the above information and the result of your audit, what are the adjusted balances of the
following accounts:
43. Cash
a. 963,200 c. 668,600
b. 681,000 d. 688,600
44. Accounts receivable

a. 2,908,600 c. 2,289,000
b. 2,564,000 d. 2,548,500
45. Inventory
a. 5,956,000 c. 5,860,000
b. 6,035,000 d. 6,080,000
46. Accounts payable

a. 4,789,400 c. 4,790,900
b. 4,603,500 d. 4,573,000

47. Which of the following audit procedures would the auditor least likely perform in auditing inventories for
possible overstatement error?
a. Attending and observing physical count of inventories conducted by the client.
b. Performing test counts for a sample of the prenumbered inventory tags, trace these counts not the
client’s count sheets and to the client’s final inventory listing.
c. Selecting items on the client’s final inventory listing, which is essentially the subsidiary ledger for
the adjusted general ledger balance, and then agreeing those selected items to the inventory count
tags noted as a result of the auditors test counts.
d. Performing cut off procedures on sales and purchases made before and after year-end to ascertain
whether items were included in the physical count for those that are not yet valid sales as at year
end and those that are already valid purchases as at year end.
PROBLEM 15:
The following resulted from you audit staff’s sales cut-off procedures, in line with your audit of Funko Inc.’s financial
statements for the period ended December 31, 2022:
December Sales Journal Entries

SI Number Delivery Date Amount Remarks
21091 Dec. 27 P56,000 FOB Destination
21092 Dec. 28 120,000 Shipped to Consignee
21093 Dec. 29 90,000 FOB Destination (Still in-transit as of Dec. 31)
21094 Dec. 31 42,000 FOB Shipping Point (Still in-transit as of Dec. 31)
21095 Dec. 31 58,000 FOB Buyer’s Warehouse (Still in-transit as of Dec. 31)
21096 Jan. 1 60,000 FOB Supplier’s Warehouse
January Sales Journal Entries

SI Number Delivery Date Amount Remarks
21097 Dec. 30 P90,000 FOB Shipping Point (Still in-transit as of Dec. 31)
21098 Jan. 2 80,000 FOB Shipping Point
21099 Jan. 2 58,000 Sold under bill and hold agreement in Dec.
21100 Jan. 3 100,000 FOB Destination
Audit notes:
a. Physical count of goods was conducted by the client on December 30, 2022. As a result all goods
delivered on or before December 30 were no longer included in the physical count.
b. Gross profit rate on all sales was at 30%.
c. The consignee’s report regarding SI 21092 disclosed that 60% of the goods covered by the invoice
remained unsold. Commission rate as agreed upon with the consignee was at 10% of sales price.
Requirements: Based on the above information and the result of your audit, what are the net adjustments to the
following:
48. Accounts receivable
a. 76,800 credit c. 136,800 credit
b. 132,000 credit d. 88,600 credit
49. Inventory
a. 84,000 debit c. 72,800 debit
b. 43,400 debit d. 7,000 credit
50. Net Income

a. 88,600 decrease c. 93,400 decrease
b. 35,400 decrease d. 110,800 decrease







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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY AP QUIZ 1

CPA Review Batch 46  October 2023 CPA Licensure Examination

AUDITING PRACTICE S. IRENEO  G. MACARIOLA  C. ESPENILLA  J. BINALUYO

2. Which of the following checks might indicate kiting?

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9. What is the correct cash balance as of November 30?

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Balance per General Ledger 2,940,000

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JANUARY PURCHASE JOURNAL ENTRIES

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JANUARY SALES JOURNAL ENTRIES

21. What is the net adjustment to accounts payable?

22. What is the net adjustment to accounts receivable?

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Current account at Bank of the Philippine Islands P6,000,000

b. The items on hand on the count date were:

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Currencies and coins P32,800

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37. What is the correct bad debt expense for 2022?

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41. What is the correct bad debt expense for 2022?

44. Accounts receivable

46. Accounts payable

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December Sales Journal Entries

January Sales Journal Entries

50. Net Income

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