FINAL EXAM – AUDITING PROBLEMS
NAME OF STUDENT: YEAR AND SECTION:
ANSWER THE FOLLOWING :
PROBLEM 1
Your audit of Nice Company disclosed that your client kept very limited records.
Purchase of merchandise were paid for by check, but most other items were out of
cash receipts. The company’s collections were deposited weekly. No record was
kept of cash in the bank, nor was a record kept of sales. Accounts receivable were
recorded only by keeping a copy of the ticket , and this copy was given to the
customer when his paid his account.
Additional information.
a. On January 2, 2020 Nice Company started business and issued share capital
, 72000 shares with 100 par , for the following considerations
Cash 600,000
Building 15 yrs useful life 5,400,000
Land 1,800,000
7,800,000
b. An analysis of the bank statements showed total deposit, including the
original cash investment of 4,200,000. The balance in the bank statement on
December 31, 2020 was 300,000, but there were checks amounting to
60,000 dated in December but not paid by the bank until January 2016. Cash
on hand on December 31, 2020 was 150,000 including customers deposit of
90,000
c. During the year, Nice borrowed from the bank and repaid 150,000 and
30,000 interest
d. Disbursements paid in cash during the year were as follows
Utilities 120,000
Salaries 120,000
Supplies 240,000
Dividends 180,000
Total 660,000
e. An inventory of merchandise taken on December 31, 2020 showed 906,000
of merchandise
f. Tickets for accounts receivable totaled 1,080,000 but 60,000 of that amount
may prove uncollectible
g. Unpaid suppliers invoices for merchandise amounted 420,000
h. Equipment with cash price of 480,000 was purchased in early January on a
year installment basis . During the year , checks for the down payment and
all maturing installments totaled 534,000. The equipment has a useful life of
5 years.
Questions
Based on the above and the result of your audit, determine the following (disregard
income taxes )
1. Payments for merchandise purchases in 2020
a. 2,586,000
b. 2,436,000
c. 2,646,000
d. 3,246,000
2. Collections from sales in 2020
a. 3,720,000
b. 4,320,000
c. 3,000,000
d. 4,920,000
3. Net income for the year ended December 31, 2020
a. 1,770,000
b. 1,620,000
c. 1,560,000
d. 960,000
4. Shareholders equity as of December 31, 2020
a. 9,390,000
b. 9,240,000
c. 9,180,000
d. 8,580,000
5. Total assets as of December 31, 2020
a. 9,583,200
b. 9,540,000
c. 9,390,000
d. 9,450,000
PROBLEM 2
The PANGASINAN Company values its inventory at the lower of FIFO cost or net
realizable value . The inventory accounts at December 31, 2020 had the following
balances .
Raw materials 650,000
Work in process 1,200,000
Finished goods 1,640,000
The following are some of the transactions that affected the inventory of the
PANGASINAN Company during 2020
January 8 PANGASINAN purchased raw materials with a list price of 200,000 and
was given a trade discount of 20% and 10%., terms 2/15n/30 . PANGASINAN
values inventory at the net invoice price
February 14 PANGASINAN repossessed an inventory item from a customer who
was overdue in making payment. The unpaid balance on the sale is 15,200. The
repossessed merchandise is to be refinished and placed on sale. It is expected that
the item can be sold for 24,000 after estimated refinishing costs of 6,800. The
normal profit for this item is considered to be 3,200.
March 1 refinishing costs of 6,400 were incurred on the repossessed item
April 3 The repossessed item was resold for 24,000 on account, 20 % down
August 30 A sale on account was made of finished goods that have a list price of
59,200 and a cost of 38,400. A reduction of 8,000 off the list price was granted as a
trade in allowance . The trade in item is to be priced to sell at 6,400 as is. The
normal profit on this type of inventory is 25% of the sales price.
Questions
Based on the above and the result of your audit, answer the following ( assume the
client is using perpetual inventory system)
6. The entry on January 8 will include a debit to Raw materials inventory
a. 200,000
b. 144,000
c. 141,120
d. 196,000
7. The repossessed inventory on Feb. 14 is most likely to be valued at
a. 14,000
b. 24,000
c. 17,200
d. 14,400
8. The journal entries on April 3 will include a
a. Debit to cash of 24,000
b. Debit to cost of repossessed goods sold at 14,000
c. Credit to profit non sale of repossessed inventory of 3,600
d. Credit to repossessed inventory of 20,400
9. The trade in inventory on August 30, is most likely to be valued at
a. 8,000
b. 4,800
c. 6,000
d. 6,400
10. How much will be recorded as sales on August 30?
a. 51,200
b. 56,000
c. 57,200
d. 57,600
Problem 3
In connection with your examination of the financial statements of the ANA
CORPORATION for the year 2020, the company presented to you the Property,
Plant and Equipment section of its statement of financial position as of December
31, 2019 which consist of the following ;
Land 400,000
Buildings 3,200,000
Leasehold improvements 2,000,000
Machinery and equipment 2,800,000
The following transactions occurred during 2020
Land site number 102 was acquired 4,000,000. Additionally , to acquire the land
Anne paid a 240,000 commission to a real estate agent. Costs of 60,000 were
incurred to clear the land. During the course of clearing the land, timber and gravel
were recovered and sold for 20,000
A second tract of land (site number 103) with a building was acquired for
1,200,000. The closing statement indicated that the land value was 800,000 and
the building value was 400,000. Shorty after acquisition, the building was
demolished at a cost of 120,000. A new building was constructed for 600,000 plus
the following costs:
Excavation fees 44,000
Architectural design fees 32,000
Building permit fee 4,000
The building was completed and occupied on September 1, 2020
A third tract of land (site number 104 ) was acquired for 2,400,000 . the entity is
undecided regarding its future use.
Extensive work was done to a building occupied by ANA CORPORATION under lease
agreement. The total cost of the work was 500,000, which consisted of the
following
PARTICULARS AMOUNT USEFUL LIFE
Paintings of ceilings 40,000 one year
Electrical work 140,000 ten years
Construction of extension to current
Working area 320,000 thirty years
The lessor paid one half of the costs incurred in connection with the extension for
the current working area
During December 2020, costs of 260,000 were incurred to improve leased office
spaces . The related lease will terminate on December 31, 2022,and is not expected
to be renewed .
A group of new machines was purchased under a royalty agreement which provides
for payment of royalties based on units of production for the machines. The invoice
price of the machines was 300,000, freight costs were 8,000 , unloading charges
were 6,000 and royalty payments for 2015 were 52,000
Questions
Based on the above and the result of your audit, determine the adjusted balance of
the following as of December 31, 2020
11. Land
a. 8,400,000
b. 6,000,000
c. 5,480,000
d. 5,900,000
12. Buildings
a. 3,800,000
b. 4,280,000
c. 4,200,000
d. 3,880,000
13. Leasehold improvements
a. 2,600,000
b. 2,300,000
c. 2,560,000
d. 2,720,000
14. Machinery and equipment
a. 3,114,000
b. 3,100,000
c. 3,166,000
d. 3,108,000
15. An auditor is verifying the existence of newly acquired fixed assets
recorded in the accounting records. Which of the following is the best
evidence to help achieve this objective?
a. Documentary support obtained by vouching entries to subsidiary records and
invoices
b. Oral evidence obtained by discussions with operating management
c. Physical examination of a sample of newly recorded fixed assets
d. Documentary support obtained by reviewing titles and tax returns
Problem 4
The following information pertain to TAAL COMPANY ‘s delivery trucks
DELIVERY EQUIPMENT
DATE PARTICULARS DEBIT CREDIT
1.1.18 TRUCKS 1,2,3,4 3,200,000
3.15.19 REPLACEMENT OF TRUCK 3 TIRES 25,000
7.1.19 truck 5 800,000
7.10.19 reconditioning of truck 4 which was
Damaged in a collision 35,000
9.1.19 insurance recovery on truck 4 accident 33,000
10.01.19 sale of truck 2 600,000
4.1.20 truck 6 1,000,000 150,000
5.2.20 repainting of truck 4 27,000
6.30.20 truck 7 720,000
ACCUMULATED DEPRECIATION
DATE PARTICULARS DEBIT CREDIT
12.31.18 DEPRECIATION EXPENSE 300,000
12.31.19 depreciation expense 300,000
12.31.20 depreciation 300,000
a. On July 1, 2019 , truck 3 was traded in for a new truck , truck 5 costing
850,000 , the selling party allowed a 50,000 trade in value for the old truck
b. On April 1,2020 truck 6 was purchased for 1,000,000, truck 1 and cash of
850,000 being given for the new truck
c. The depreciation rate is 20% by unit basis
d. Unit cost of truck 1 to 4 is at 800,000 each
Based on the above and the result of your audit , answer the following
16. How much is the net loss on disposal of trucks in 2019?
a. 510,000
b. 430,000
c. 590,000
d. 230,000
17. What is the loss on trade in of truck 1?
a. 410,000
b. 290,000
c. 250,000
d. 150,000
18. What is the adjusted balance of the delivery equipment account as of
December 31, 2020?
a. 4,170,000
b. 2,650,000
c. 3,170,000
d. 3,370,000
19. The 2020 depreciation expense is understated by
a. 372,000
b. 252,000
c. 92,000
d. 292,000
20. Which of the following procedures would least likely lead the auditor to
detect unrecorded fixed assets disposals ?
a. Examine insurance policies
b. Review repairs and maintenance expense
c. Review property tax files
d. Scan invoices for fixed assets additions
PROBLEM 5
MARIA COMPANY is constructing a building . construction began on January 1 and
was completed on December 31. Expenditures were 2,400,000 on March 1
1,980,000 on June 1 and 3,000,000 on December 31. Maria company borrowed
1,200,000 on January 1 on a 5 year 12% note to help finance construction of the
building. In addition , the company had outstanding all year a 10%,
3 year 2,400,000 note payable and an 11 % 4 year 4,500,000 note payable .
21. What are the weighted average accumulated expenditures?
a. 4,380,000
b. 3,155,000
c. 7,380,000
d. 3,690,000
22. What is the weighted average interest rate used for interest
capitalization purposes/
a. 11%
b. 10.85%
c. 10.5%
d. 10.65%
23. What is the avoidable interest for Maria Company?
a. 144,000
b. 463,808
c. 164,281
d. 352,208
24. What is the actual interest for Maria Company?
a. 879,000
b. 891,000
c. 735,000
d. 352,208
25. What amount of interest should be charged to expense?
a. 382,792
b. 735,000
c. 526,792
d. 415,192
PROBLEM 6
The following information relates to the obligation of LOVE CORPORATION as
of December 31, 2020
- Accounts payable for goods and services purchased on open account
amounted to 35,000 at December 31, 2020
- On December 15, 2020 LOVE Corporation declared a cash dividend of .05 per
share, payable on January 12, 2021 , to shareholders of record as of
December 31, 2020 . Love Corporation had 1 million ordinary shares issued
and outstanding .
- On December 31, n2020 , Lakers entered into a six year finance lease on a
warehouse and made the first annual lease payment of 100,000 . the
incremental borrowing rate was 12 %, and the interest rate implicit in the
lease , which was known to LOVE Corporation was 10%. The rounded present
value factors for an annuity due for six years are 4.6 at 12% and 4.8 at 10%
- On July 1, 2020 LOVE CORPORATION issued 500,000 8% bonds for 440,000
to yield 10%. The bonds pay interest annua;;y every JUNE 30. AT December
31, 2020 , the bonds were trading on the open market at 86 to yield 12 %.
LOVE CORPORATION uses the effective interest method.
- Lakers 2020 accounting profit was 850,000 and the taxable profit was
600,000. The difference is due to 100,000 permanent differences and
150,000 of temporary difference related non current assets. At December 31,
2015 LOVE Corporation had cumulative taxable differences of 300,000
related to non current assets. Love Corporation effective tax rate is 30%.
Love Corporation made no estimated tax payments during the year.
QUESTIONS
Based on the above and the result of your audit, determine the following as of and
for the year ended December 31, 2020
26. Carrying amount of finance lease liability
a. 480,000
b. 428,000
c. 380,000
d. 360,000
27. Carrying amount of bonds payable
a. 446,400
b. 444,000
c. 442,000
d. 430,000
28. Current liabilities
a. 342,200
b. 327,000
c. 367,000
d. 347,000
29. Non current liabilities
a. 850,000
b. 854, 400
c. 895,000
d. 902,800
30. Interest expenses
a. 92,000
b. 70,000
c. 44,000
d. 22,000
PROBLEM 7
In connection with your audit of the GROW COMPANY , you were asked to prepare
comparative data from the company’s inception to the present. The following were
gathered during your audit.
a. Grow Company ‘s charter became effective on January 2, 2016 when
80,000 , P10 PAR VALUE , ORDINARY SHARES AND 40,000, 5 %
CUMULATIVE , NON PARTICIPATING PREFERENCE SHARES WERE ISSUED.
The ordinary share was sold at 12 per share and the preference share was
sold at its par value of 100 per share .
b. GROW COMPANY was unable to pay preference dividends at the end of its
first year. The owners of the preference shares agreed to accept 2 ordinary
shares for every 50 shares of preference shares owned in discharge of the
preference share dividends due on December 31, 2016. The shares were
issued on January 2, 2017. The fair value was 30 per share for ordinary on
the date of issue.
c. GROW COMPANY acquired all outstanding shares of DAY CORPORATION on
May 1, 2018. , in exchange for 40,000 ordinary shares of GROW COMPANY
d. GROW COMPANY splits its ordinary shares 3 for 2 on January 1, 2019 and 2
for 1 on January 1, 2020
e. GROW COMPANY offered to convert 20% of the preference shares to ordinary
on the basis of 2 ordinary shares for 1 preference shares . The offer was
accepted and the conversion was made on July 1, 2020
f. No cash dividends were declared on ordinary shares until December 31,
2013. Cash dividends per ordinary share were declared and paid as follows:
December 31 June 30
2018 P 4 -
2019 5 P 3
2020 2 2.50
QUESTIONS
Based on the above and the result of your audit, determine the following
31. Outstanding number of ordinary shares as of December 31, 2020
a. 364,800
b. 684,800
c. 372,800
d. 380,800
32. Outstanding number of preference shares as of December 31, 2020
a. 40,000
b. 24,000
c. 32,000
d. 96,000
33. Amount of cash dividends declared and paid to ordinary shareholders
for the year 2019.
a. 972,800
b. 608,000
c. 1,459,200
d. 1,981,440
34. Amount of cash dividends declared and paid to ordinary shareholders
for the year 2020.
a. 3,911,040
b. 3,041,600
c. 1,713,600
d. 1,673,600
35. Where no independent stock transfer agent are employed and the
corporation issues its own stocks and maintains stock records, cancelled
stock certificates should
a. Be destroyed to prevent reissuance
b. Be defaced and sent to the secretary of state
c. Be defaced to prevent reissuance and attached to their corresponding
stubs
d. Not be defaced but segregated from other stock certificates and retained
in a canceled certificates file
Problem 8
The following data were taken from your current working papers in connection with
your audit of the PAPER COMPANY ‘s financial statement for the year ended
December 31, 2020
Cash account consists pf the following items
Petty cash fund P 25,000
Security bank checking account (37,500)
Allied banks current account 344,250
Total per general ledger 331,750
a. The count of the cashiers accountability on January 2, 2021 , revealed total
bills and coins of 9,000. Unreplenished vouchers for various expenses
totaled 16,000 of which 3,000 pertains to January 2021
b. On December 29,2020a check for 87,500 was drawn against security bank
current account resulting in bank overdraft of 37,500. The checks was picked
up by the supplier on January 3, 2021
c. Bank reconciliation statement prepared by the cashier for the allied bank
account follows:
Bank balance 310,500
Add deposit in transit 61,250
Bank service charges 1,250 62,500
Total 373,000
Less outstanding checks
Check no. amount
214 2,500*
219 20,750
225 6,000 .
228 8,500 28,750
Book balance 344, 250
Check certified by bank in December 2020
All reconciling items were traced to the bank statement. Further investigation
indicated that the deposits in transit include a customers post dated check
amounting to 40,000. The check represents a collection from account customer for
sales made in the middle of October 2020
Questions
Based on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following
36. How much is the adjusted balance of petty cash fund as of December
31, 2020
a. 12,000
b. 9,000
c. 13,000
d. 16,000
37. How much is the adjusted allied bank current account as of December
31, 2020?
a. 336,500
b. 296,500
c. 305,500
d. 330,250
38. How much is the cash shortage as of December 31, 2020
a. 46,500
b. 9,000
c. 6,500
d. 0
39. How much is the adjusted cash at December 31, 2020?
a. 355,500
b. 367,500
c. 398,500
d. 358,500
40. An auditor suspects that a client cashier is misappropriating cash
receipts for personal use by lapping customers checks received in the mail.
In attempting to uncover this embezzlement scheme, the auditor most likely
would compare the
a. Dates checks are deposited per bank statements with dates remittance
credits are recorded
b. Daily cash summarizes with the sums of the cash receipts journal entries
c. Individual bank deposit slips with the details of the monthly bank statements
d. Dates uncollectible accounts are authorized to be written off with the dates
the write offs are actually recorded.
PROBLEM 9
YOU OBTAINED THE FOLLOWING INFORMATION FRM BALANCE SHEET OF QUEZON
COMPANY in connection with your audit of the company’s financial statements for
the year 2020
DECEMBER 31, 2020 DECEMBER 31, 2019
CASH 706,000 200,000
Notes receivable 0 50,000
Inventory ? 399,750
Accounts payable ? 150,000
All operating expenses are paid by Quezon Company with cash and all purchases of
inventory are made on account. Quezon Company sells only on product . All sales
are cash sales which are made for 100 per unit. Quezon purchases 1500 units of
inventory per month and values its inventory using periodic FIFO. The unit cost of
inventory during January 2020 was 65.20 and increased .20 per month during the
year. During 2020 payments to suppliers totaled 943,400 and operating expenses
totaled 440,000. The ending inventory for 2019 was valued at 65 per unit.
Questions
Based on the above and the result of your audit, determine the following
41. Number of units sold during 2020
a. 18,900
b. 18,400
c. 8,268
d. 8,768
42. Accounts payable balance at December 31, 2020
a. 400,000
b. 380,200
c. 150,000
d. 382,500
43. Inventory amount at December 31, 2020
a. 385,900
b. 1,055,183
c. 352,500
d. 1,022,483
44. Which of the following audit procedures would provide the least
reliable evidence that the client has legal title to inventories
a. Confirmation of inventories at locations outside the clients facilities
b. Observation of physical inventory counts
c. Examination of paid vendors invoices
d. Analytical review of inventory balances compared to purchasing and sales
activities
45. An auditor generally tests physically security controls over inventory
by
a. Test counts and cutoff procedures
b. Examination and reconciliation
c. Inquiry and observation
d. Inspection and recomputation
PROBLEM 10
IN 2015, HAPPY corporation acquired a silver mine in Benguet . Because the mine is
located deep in Baguio mountains , Happy Corporation was able to acquire the mine
for the low price of 50,000. In 2016 , Happy Corporation constructed a road to the
silver mine made in 2016 cost 750,000. Because of the improvements to the mine
and the surrounding land , it is estimated that the mine can be sold for 600,000
when the mining activities are complete.
During 2017, five buildings were constructed near the mine site to house the mine
workers and their families . The total cost of the five buildings was 1,500,000.
Estimated residual value is 250,000. In 2015 , geologist estimated 4 million tons of
silver ore could be removed from the mine for refining. During 2018 , the first year
of operations only 5,000 tons of silver ore were removed from the mine. However
in 2019 workers mined 1 million tons of silver . during that same year , geologist
discovered that the mine contained 3 million tons of silver ore in addition to the
original 4 million tons . improvements of 275,000 were made to the mine early in
2014 to facilitate the removal of the additional silver . Early in 2019, an additional
building was constructed at a cost of 225,000 to house the additional workers
needed to excavate the added silver. This building is not expected to have any
residual value .
In 2020 2.5 million tons of silver were mined and costs of 1,100,000 were incurred
at the beginning of the year for improvements to the mine.
Questions
Based on the above and the results of your audit, determine the following ( round
off depletion and depreciation rates to two decimal places )
46. Depletion for 2018
a. 6,300
b. 7,250
c. 6,500
d. 5,550
47. Depletion for 2019
a. 1,300,000
b. 780,000
c. 1,820,000
d. 870,000
48. Depreciation for 2019
a. 250,000
b. 180,000
c. 490,000
d. 210,000
49. Depletion for 2020
a. 1,950,000
b. 2,425,000
c. 2,150,000
d. 2,275,000
50. Depreciation for 2020
a. 525,000
b. 1,225,000
c. 625,000
In line with your audit of Santos Corporation for the period ending December
31,2020 your audit staff provided you the following notes :
Audit notes:
a. Accounts receivable from customers increased during the year by 4,200,000.
Total discounts taken by customers was at 1,580,000 while total sales return
which included the customer refunds was at 2,420,000.
b. The allowance for bad debts increase during the year by 840,000. During the
year the company wrote off 1,120,000 in bad debts. While recovery of
previous write off (included in the cash collections from customers ) was at
420,000.
c. Advances from customers decreased during the year by 1,900,000
d. Accounts payable to suppliers increased during the year by 3,780,000. Total
discounts taken by the company for purchases was at 1,290,000 while total
purchase returns which included the supplier refunds was at 1,960,000.
e. Advances to suppliers increased during the year by 1,512,000
f. Inventories increased during the year by 2,690,000
g. The equipment account increased by 2,000,000 during the year while
carrying value of the equipment sold during the year was at 1,600,000
h. The accumulated depreciation account increased by 1,000,000 during the
year
i. The following information had been provided by the company’s accountant
based on its cash records
Cash collections from customers 45,780,000
Cash payment to suppliers 24,490,000
Cash payment of operating expenses 8,650,000
Cash payment for acquisition of an equipment 5,000,000
Cash collection from disposal of an equipment 1,040,000
Cash refunds received from purchase returns 640,000
Cash refunds paid for sales returns 830,000
51. What is the accrual basis gross sales ?
a. 55,750,000
b. 55,000,000
c. 56,170,000
d. 56,580,000
52. What is the accrual basis gross purchases ?
a. 29,368,000
b. 30,008,000
c. 30,880,000
d. 31,520,000
53. What is the accrual basis cost of sales?
a. 23,428,000
b. 24,940,000
c. 24,068,000
d. 25,580,000
54. What is the correct bad debts expense for the year ?
a. 1,540,000
b. 700,000
c. 1,960,000
d. 140,000
55. What is the correct depreciation expense ?
a. 2,400,000
b. 2,000,000
c. 1,600,000
d. 1,400,000
Cruz Corporation purchased 100,000 8% bonds for 92,418.00 on January
01,2017. Cruz classified the bonds as available for sale . The bonds were purchased
to yield 10% interest. Interest is payable annually every January 1. The bonds
mature on January 1,2022 . On January 2, 2019 , Cruz classified the bonds as held
to maturity.
The prevailing interest rate of the bonds were as follows:
December 31, 2016 10%
December 31, 2017 11%
December 31, 2018 12%
December 31, 2019 11.5%
56. Interest income for the year 2018
a. 8,000
b. 9,366
c. 9,242
d. 9,818
57. Carrying value of investment on December 31, 2018
a. 95,026
b. 90,393
c. 93,240
d. 90,873
58. Net realized gain or (loss ) on AFS as of December 31, 2018
a. (1,786)
b. (4,053)
c. 4,053
d. (4,633)
59. Unrealized gain or loss in 2019
a. (3,289)
b. (4,185)
c. 3,289
d. 448
60. Carrying value of investment as of December 31, 2019
a. 97,240
b. 96,429
c. 93,240
d. 110,000
61. CALAMBA Corporation pretax accounting income for the year 2020 was
1,2715,000and included the following items
Impairment of goodwill 90,000
Amortization of identifiable tangibles 85,500
Depreciation on building 120,000
Loss from fire 66,000
Gain on sale of machinery 225,000
Profit sharing payments to employees 97,500
Vinci Corporation is planning to purchase CALAMBA Corporation in attempting
to measure CALAMBA normal earnings for 2020. Vinci determined that the
fair value of the building is triple the carrying amount and that the remaining
economic life is is double that is being used by CALAMBA. VINCI would
continue the profit sharing payments to employees , such payments are
based on income before depreciation and amortization. Compute for the
normal earnings for the purpose of computing goodwill
a. 1,056,000
b. 1,206,000
c. 1,146,000
d. 966,000
62. MANALAC Company incurred the following costs during 2020
Quality control during commercial production , including routine testing of
products 460,000
Laboratory research aimed at discovery of new knowledge 540,000
Engineering follow through in an early phase of commercial
Production 120,000
Adaptation of existing capability in a particular requirement
Or customers need as part of continuing commercial activity 110,000
Trouble shooting in connection with breakdowns during
Commercial production 230,000
Searching for application of new research findings 150,000
Compute the amount that will be classified and expensed as research and
development
a. 690,000
b. 540,000
c. 1,150,000
d. 1,610,000
63. PANGASINAN CORPORATION is engaged in developing computer
software for the small business at home computer market. Most of the
computer programmers are involved in developmental work designed to
produce software that will perform fairly specific tasks in a user friendly
manner. Extensive testing of the working model is performed before it is
released to production for preparation of masters and further testing. As a
result of careful preparation , PANGASINAN has produced several products
that have been very successful in the market place. The following costs were
incurred during 2020
Salaries and wages of programmers during research 940,000
Expenses related to projects prior to establishment of
Technological feasibility 313,600
Expenses related to projects after technological feasibility
Has been established but before software is available for
Production 198,000
Amortization of capitalized software development cost
From current and prior years 107,000
Costs of produce and prepare software for sale 225,200
Additional data for 2020
Sales of products for the year 2,060,000
Beginning inventory 568,000
Portion of goods available for sale sold during the year 60%
Based on above and result of your audit , determine the following
63.Amount to be capitalized as software development costs subject to
amortization
a. 1,451,600
b. 198,000
c. 736,800
d. 0
64. Cost of ending inventory
a. 270,000
b. 317,280
c. 439,280
d. 360,080
65. Total amount related to the development of computer software that
should be expensed when incurred
a. 1,253,600
b. 940,000
c. 1,451,600
d. 0
GOODLUCK !!!!!
RRS
