BAC 517 – Auditing in CIS Environment Midterm Exam

Problem 1
Below are the statements of financial position of Bheverlynn Corporation as at March 31, 2018 and March 31, 2017, together with
the statement comprehensive income for the year ended March 31, 2018.

BHEVERLYNN CORPORATION
STATEMENTS OF FINANCIAL POSITION
AS AT MARCH 31, 2018 AND 2017
(In Pesos)

2018 2017

ASSETS
Noncurrent Assets
Property, plant and equipment 925,000 737,000
Intangible assets 290,000 160,000
Total Noncurrent Assets 1,215,000 897,000

Current Assets
Inventories 360,000 227,000
Trade receivables 274,000 324,000
Investments 143,000 46,000
Cash 29,000 117,000
Total Current Assets 806,000 714,000

TOTAL ASSETS 2,021,000 1,611,000

EQUITY AND LIABILITIES

Equity
Share capital – P1 ordinary shares 500,000 400,000
Share premium 350,000 100,000
Revaluation surplus 160,000 60,000
Retained earnings 229,000 255,000
Total Equity 1,239,000 815,000

Noncurrent Liabilities
6% debentures 150,000 100,000
Finance lease liabilities 100,000 80,000
Deferred tax liability 48,000 45,000
Total Noncurrent Liabilities 298,000 225,000

Current Liabilities
Trade payables 274,000 352,000
Accruals and other current liabilities 132,000 54,000
Finance lease liabilities 17,000 12,000
Income tax payable 56,000 153,000
Debenture interest 5,000 –
Total Current Liabilities 484,000 571,000

TOTAL EQUITY AND LIABILITIES 2,021,000 1,611,000

BHEVERLYNN CORPORATION
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED MARCH 31, 2018
(In Pesos)

2018
REVENUE 1,476,000
COST OF SALES (962,000)
GROSS PROFIT 514,000
OPERATING EXPENSES (157,000)
FINANCE COSTS (15,000)
INCOME BEFORE INCOME TAX 342,000
INCOME TAX EXPENSE (162,000)
NET INCOME 180,000
OTHER COMPREHENSIVE INCOME:
Gain on revaluation of property, plant, and equipment 100,000
TOTAL COMPREHENSIVE INCOME 280,000

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BAC 517 – Auditing in CIS Environment Midterm Exam

Notes:
a) During 2018, amortization of P60,000 was charged on intangible assets.

b) During 2018 items of property, plant and equipment with a carrying amount of P103,000 were sold for P110,000. Profit on
sale was netted off against 'operating expenses'.

Depreciation charged in the year on property, plant and equipment totaled P57,000. Bheverlynn purchased P56,000 of
property, plant and equipment by means of finance leases, payments being made in arrears on the last day of each accounting
period.

c) The following is the ending balances of allowance for asset impairment:

2018 2017
Receivables P21,000 P43,000
Inventory 59,000 18,000

Movements in allowance for asset impairment is included in “operating expenses”.

d) The current asset investments are government bonds and management has decided to class them as cash equivalents.

e) The new debentures were issued on April 1, 2017. Finance cost includes debenture interest and finance lease finance charges
only.

f) During the year Bheverlynn made a 1 for 8 bonus issue, capitalizing its retained earnings, followed by a rights issue.

Required:
Prepare a statement of cash flows for Bheverlynn Corporation in accordance with IAS 7 Statement of Cash Flows using the indirect
method.

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