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(Mindanao) Cagayan De Oro City (088) 3093073 Davao City (082) 2250049
Since 1977
CPA REVIEW.
AUDITING PROBLEMS
AP .1601-Audit of Inventories
OCAMPO/CABARLES
AY 2014
transactions
and
events
have
been
events
interests
are
appropriate
included
amounts
in
and
the
financial
any
resulting
statements
at
valuation
or
have
been
Assertions about presentation and disclosure: (COCA)
Assertions
(RECV)
about
account
balances at
the
period
end:
Authority
and
responsibility
for
controlling
the
6.
There
should
be
careful
selection
of
inventory
7.
4.
Quantitative
controls
through
perpetual
specific
authorizations
upon
made only
3.
be
one person.
2.
mventory
Page 1 of 8
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AP.1601
Purchases
Completeness:
1.
2.
voucher reg,ster.
Observe
the
client
personnel
physically
counting
inventory.
3.
6.
determine
that
the
item
is
included
authenticity
and
Accuracy (Valuation):
amounts
order.
Production
disclosed.
Examine
confirmations
from
for
documents
in
inventory.
7.
underlying
5.
end
Occurrence:
reasonableness.
unusual items.
Test cutoff.
acquired
Examine
4.
net
realizable
value
NRV.
selected
requisitions,
transactions,
approved
examine
labor
tickets,
signed
and
materials
allocation
of
overhead.
Classification: Production transactions have be en recorded
b.
Occurrence:
a.
For
(Valuation):
Production
transactions
are
Review variances.
en d
Page 2 of 8
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AP.l60l
. PROBLEM NO. 1
QUESTIONS.
fo r the audit
You were engaged by
of the company's financ ial statements for the year ended
the following:
m over cost .
who I esaI e bus1ness anct makes a II sa1 es at 25a,
The
r
. s a I es for the year ended D ecem ber 31 , 2014
a.
records:
Date
ReL
Dec.
28
Dec.
10,000 . 29
Dec.
46,000
30
Dec.
68,000
31
Dec.
16,000
31
Dec.
(5,530,000)
31
Sale s Invoice
RR
observed
the
65,000
24,000
42,000
64,000
(1,000.000)
in v entory
of
l
f\
5.
31, t he
last
goods
1n
loaded and
two delivery
enroute
to Brooks
rece1ved .the
goods,
d)
b.
was
deducted
from
2014,
you
found
the
following
vendor
Goods
costing
P200,000,
sold for
P300,000,
were
c.
The
shipment
P600,000
December
30,
2014,
of goods to
terms
FOB
: :... ",)
:'l
custo mer
destination,
on
was
I nventory .
f.
cust omer.
physical
These
inventory.
goods
are
not
Included
in
the
QUESTIONS:
Based on the above and the result of your audit, answer
the following:
31,
1064.
December
point.
' r".:<-?c;l;'
trucks
Brooks
P 400,000
P1,218,000
siding were
P120,000
/--
c)
P370,000
sealed on
c.
d.
e.
vendor.
was
P350,000
P220,000
ended
P814,000
a.
ILU
P968,000
b.
No.
c.
d.
/vBLEM NO.
Receiving Report
Truck
PSOO,OOO
c.
P864,000
b.
d.
the
+'
a.
P3,018,000
P3,818,000
c.
_cj,.
P354,000
which had been used was No. 1063 and that no shipments
b)
P3, 754,000
P41S,OOO
a.
P3,000,000
b.
b.
that at
P5,350,000
a.
properly taken.
found
PS,400,000
_cl.c
P600,000
500,000
400,000
physical
3.
70,000
!'__ ---=
Receiving Report
Accounts receivable
Accoun\S payable
35,000 .
1058
RR No ..
1059
RR No.
1061
RR No.
1062
RR No.
1063
Closing
entry
Inventory
You
P2,700,000
1057
RR No.
150,000
27
40,000
965
51 No.
966
51 No.
967
51 No.
969
51 No.
970
Sl No.
971
Closing
entry
Note: 51
Bala nce
forwa rded
RR No.
Dec.
P5,200,000
51 No.
27
Dec.
28
Dec.
28
Dec .
31
Dec.
31
Dec
31
Dec.
31
Amount
PURCHASES
Date
Ref.
Balance
forwarded
Dec.
v 2.
c.
PS,2SO,OOO
PS,1SD,OOO
b.
the
However, the
purchase
price
of
by
a.
P230,000
b.
P190,000
d.
P140,000
P290,000
PBOO,OOO.
Page 3 of 8
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AP.1601
e)
150,000
REQUIRED:
1.
2-c-;.
SOLUTION GUIDE
2.
3.
Over Under)
SOLUTION GUIDE:
Requirement No. 1
Sales, up to 11/30
Less COS, up to 11/30:
Inventory, 1/1
Net purchases, 11/30
TGAS
Inventory, 11/30
Gross profit
PROBLEM NO. 3
Unadjusted
b)
c)
* d)
Page
4 of 8
112,500
22,500
30,000
<,.Vo"
___;
--
I.P.,ll/30 :
Ll.Lmos.)
10,125,000
-----,
N.P.,12/31 i
'
(12 mos.) ;
12,000,000
ji'2,_0D
/
"\
(r-.--
. .,::I
--
i, -_,_.r,, s:-"J)
2
Sales, up to 12/31
Less sales, up to 11/30
Sales- December
Sales without profit
Sales with profit
x Cost ratio
COS with profit
COS without profit
Total C - f.\" '}-, ;_.1
1_ '1
i: . :.:.. :J
0 :t<io
P14,400,000
_1600,000
1,800,000
150,000)
1,650,000
"'
'
,-Pi,,
i I 3J72
'i)':.
,.iu; iC. 0
I IL'=lv, 0;;:-
2t->t'/r
No. 3
Inventory, 1/1
Net purchases, 12/31
TGAS
Less cost of sales:
With profit
[(14.4M -.15M)x.8]
Without profit
Estimated inventory, 12/31
1,312,500
,,_ ;::;::; '"::YJ
;-.:- r'\.>
'!,p,<:::0 -,if,')'-r">,-s:--!O,,'[b"-
-': (! . ..f.':'i:J)
82,500
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- _____j
--i----
Requirement No.
:l>i:o'
'' ' .
'&
t:;.. cue:
-
Adjusted
Requirement
15,000
L{,7'2, -pi)
\_ ____::__:
12,000,000
1:.
, ) 7,!..r
1,425,000
10,125,000
1,1;11,500
JJLD"
Inventory,
11/30
P12,600,000
AP.1601
!(A,!.
-tll\,.>J<
J - : M NO.4
n
On
April
warehouse
QUESTIONS.
:\
J:ged
21, 2014, 2
of
Muntinlupa
the
office and
The
only
Com pany.
the following:
Muntinlupa Company
Trial Balance
P237,000
d.
P343,000
a.
P650,500
b.
P673,500
c.
P660,000
d.
P683,000
400,000
750,000
Land
350,000
a.
P400,000
c.
P360,000
1,100,000
b.
P440,000
d.
P354,000
(,;-.-1i ow
Accounts payable
237,000
Accrued expenses
180,000
1,000,000
Retained earnings
Sales
Operating expenses
344 000
Totals
other expenses.
Deposits
P130,000:
P57,000
during
the
same period
consisted of receipts on
from a
vendor
in
April.
c.
.,.
Correspondence
obligations
merchandise
at
with
suppliers
April 21
of
purchases,
d.
revealed
unpaid
for
P106,000
P;2 3,000
including
April
'
Mv
for
!/
e.
c.
P1,510,000
d.
P1,506,000
a.
P786,500
b.
P835,725
a.
P1,430,000
is the
c.
P830,500
d.
P828,300
P570,000
P587,775
c.
P623,500
d.
P579,500
b.
Accounts
P1,519,500
a.
1 to 21 totaled
of
b.
b.
a.
't
P3 700.00Q
balance
a.
6 . /How much
f"'/ 2014?
4,
adjusted
L,_ 5/'}i ow much is the cost of sales for the period January 1
1,350,000
520,000
the
21, 2014?
56,000
Purc h ases
is
P 413,000
Other assets
much
Ace. depreciation
Accounts receivable
Building
b.
c.
P579,500
P477,000
ftLEM
NO. 5
d.
P535,000
P512,000
.
You are engaged rn the regular annual exa
ination of the
workload
at
year . .e_nd,
recommendation,
November 30,
the
2014.
l9..
company,
reduce the
upon
your
physical i nventor y on
To
gross profit ratio for the past two years was rn effect
the current year.
The company's audited
during
financial
sttements
disclosed
the
following
information:
Net sales
Net purchases
Beginning inventory
2013
2012
P5,300,000
P3,900,000
2, 350,000
2,800,000
500,000
Ending inventory
f.
c.
P106,000
CREDIT
p 180,000
Cash
P286,000
b.
a.
660,000
750,000
500,000
.;
b.
--"-.--!_
Page 5 of 8
c.
d.
{'{u'
overstated by P61,600.
information
n!
_-;,
'
("
-------'
'c
- www.prtc.com.ph
AP.1601
a.
were:
Apply
691,600
Request
a.
d.
P1,631,560
6.
.
c.
P1,715,560
b.
P1,509,760
P1,516,760
d.
P819,560
c.
b.
d.
P812,560
ll.4
a.
b.
Cs. ..xhe
P618,800
P232,400
d.
a.
b.
+
c.
772,800
d.
P1,237,600
PROBLEM NO.
P1,425,760
P338,800
P464,800
P777;600
hand.
recorded.
a.
5sJ..
Jl.
8.
)i.
'Cl.
Valuation or allocation.
a.
b.
<"'
<f
_..
57
g.r
Completeness.
>-
d.
The auditor
Existence.
:..
while
concerning
a.
counts
Comparison
of
invoices.
inventory
values
Rights.
Valuation.
=
to
purchase
of slowmoving
_:.Jt l.lmpt,(
"'IIW'1
uncover the
, Pi->'-"' _9..
test
was
inventory through
for
year-end
An auditor is
listing:
before
were adequate.
received
Existence or occurrence.
items
and
company at year-end.
Completeness.
selected
by
6.
auditor
returned
for.
c.
An
-4<
'C
items
a..
several
d.
. /An
C,"'
for
d.
the count.
memos
b.
d at the time of
;."'"""'
Which of the
c.
c.
Credit
<)_,
P386,400
pricing.
Ascertaining the physical quantities of inventory on
,.'
physical
sheets.
P942,760
the
d.
P728,560
schedule
c.
\) /
to
b.
P1,502,760
/ brocess as of December 31
client
the
P1,722,560
a.
the
a.
P1,845,760
ascertain
a.
to
QI)ESTIONS:
tests
d.
5.
profit
...- <
P386,400.
gross
c.
b.
338,800
Purchases
P1,920,800
Cost of sales
Direct labor
b.
(/ 4.
Cl>s
a.
Cost ledgers.
c.
Receiving reports.
j1
d.
.....)
su"'"""" ....- ::. ""-1S1f!IJL<'
'Vi!U
- now do
the DIY
drill -
\..>'II...<
Page 6 of8
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AP.1601
EXCEL
Jay Roy Retailmg Ltd is a food wholesaler that supplies independent grocery stores.
inventory system, with the first-in, first-out m"ethod used to assign costs to inventory items. Transactions and other
related information regarding two of the items (baked beans and plain flour) carried by lay Roy Ltd are given below for
Unit of packaging
Plain flour
Purchases
P9.50 per
case
Purchase terms
73,000 cases@
June sales
Returns and allowances
P28.50
P142,500.
Retailing Ltd.
Explanation of variance
QUESTIONS:
the following:
Jan. 8
Bolinao purchased
pnce
a.
!7
c.
P641,860
d.
P642,220
cost, as adjusted is
b.
'
"3.
4.
P134,575
..
d.
P993,675
a.
"b?,
c.
P27,440
P27,580
d.
Which
of
the
following
is
P641,360
payment.
P57,675
P57,725
be
c.
be
d.
P1,623,970
best
procedure
b.
list
trade
net
invoice
refinished
and
placed
on
sale.
It
is
P24,000
c.
d_
profit method.
Review internal controls for the physical. protection
P3,200
.
P24,000
Aug. 30
QUESTIONS:
of inventories.
/,
The Inventory
the following
balances.
Page 7 of 8
Apr. 3
for
Finished goods
given
699,535
a.
Work in process
was
P168,560
p
0
raw materials?
Raw materials
materials with a
'P15,200.
PROBLEM NO. 2
and
Feb. 1 4
Mar.
the
raw
P642,360
P200,000
-{. :
5.
_s.
of
P38.45
P39. 00
p 650,000
1,200,000
1,640,000
(Assume
following:
perpetual
inventory system)
C,s.
The entry
on Jan.
Materials Inventory of
a.
P200,000
b.
P144,000
J /The repossessed
II'
be valued at
a.
b.
P14,000
P24,000
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to
Raw
P 1 4 1,120
P1 96,00 0
S
d.
P17,200
P14,400
AP.1601
lJr
a.
b.
c.
d.
Debit
to
Cost
P14,000.
of
Repossessed
7'
b,
\;;
Sold
of
30 is most likely to be
c.
PS,OOO
P6,000
d.
P4,800
a.
"1).'
c.
P51,200
P57 ,200
d.
P56,000
+4.
P6,400
valued at
a.
Goods
of P3,600.
Credit to Repossessed Inventory of P20,400.
2.
5.
P57,600
PROBLEM NO.
6.
The cost
goods sold
prepared by your client for the year ended December
31
appears as follows:
Inventory, January 1
Purchases
100,000
Inventory, December 31
Cost of goods sold
an
examination.
\) 12.
shipping point.
P13,200 credit
a.
P27,000 debit
b.
P25,000 credit
ac.
'b.
P43,000 debit
P25,000 credit
c.
P13,200 debit
c.
P30,000 debit
c.
P30,000credit
d.
P43,000 credit
15. Sales
a. P43,000 debit
b.
c.
Cl.
P38,200 debit
P25,000 debit
d.
---
P28,000 debit
Beginning inventory
a.
c.
d.
P38,200 debit
P2,000 debit
P11,800 debit
1.
a.
Pll,SOO debit
b.
/
Purchases
b.
(_" 13.
and December 31 .
inventories appearing above were determined by physical
count of the goods on hand on those dates and no
The
e re
f'1 58Q,_QQQ
80,000
1.600.000
1,680,000
d.
P43,000 credit
No adjustment
No adjustment
during December.
but
the
goods
were
received
- end of
AP.1601
f;;OC
'
:.t:.'
J Y':- :;;.--- -: --
Page 8 of 8
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AP.1601
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