ACT1204-AUDITING 1

FINAL EXAM
SECOND SEMESTER SY 2024-2025
Problem 1
Pau, Inc. is an importer and wholesaler of cellphone accessories. Its merchandise is purchased from a number of suppliers and
is warehoused until sold to customers.

In conducting your audit of Pau’s financial statements for the year ended December 31, 2024, you determined that the internal
control system is functioning effectively. You observed the physical count of inventory on November 30, 2024.

The following information were obtained from Pau’s accounting records:

Sales for 11 months ended November 30 Php 3,400,000
Sales for the year ended December 31 3,840,000
Purchases for 11 months ended Nov. 30 2,700,000
Purchases for the year ended Dec. 31 3,200,000
Inventory, January 1 350,000
Inventory, Nov. 30 (per physical count) 380,000
Your audit disclosed the following information:
a) Shipments received in unsalable condition
and excluded from physical inventory.
The returns were not recorded because
no credit memos were received from
vendors:
Total at November 30 Php 4,000
Total at December 31
(including the November 30 unrecorded
returns) 6,000
b) Deposit made with vendor and charged to
Purchases in October. The goods were
shipped in January 2016. 8,000
c) Deposit made with vendor and charged to
Purchases in November. The goods were
shipped FOB destination on November 29
and were included in physical inventory
as goods in transit.
22,000
d) Shipments received in November and
included in the physical count at
November 30 but recorded as December
purchases. 30,000
e) Due to the carelessness of the receiving
department, a December shipment was
damaged by rain. These goods were
later sold at cost in December. 40,000
Based on the preceding information, determine the following:
1. Adjusted net purchases
a. Up to November 30: P2,666,000;
Up to December 31: P3,190,000
b. Up to November 30: P2,700,000;
Up to December 31: P3,164,000
c. Up to November 30: P2,696,000;
Up to December 31: P3,186,000

d. Up to November 30: P2,704,000;

Up to December 31: P3,184,000
2. Cost of goods sold for 11 months ended November 30, 2024. Php2,688,000
3. Gross profit ratio for 11 months ended November 30, 2024
a. 21.58% c. 21.47%
 b. 20.94% d. 20.82%
4. Gross profit for the month of December 2024. Php83,760
a. P92,136 c. P83,760
b. P91,236 d. P88,000
5. Estimated inventory at December 31, 2024.
a. P491,760 c. P490,000
b. P456,000 d. P455,120

Problem 2
The following accounts were included in the unadjusted trial balance of Alexis Company as of December 31, 2024:
Cash P 481,600
Accounts receivable 1,127,000
Inventory 3,025,000
Accounts payable 2,100,500
Accrued expenses 215,500
During your audit, you noted that Alexis held its cash books open after year-end. In addition, your audit revealed the following:
1. Receipts for January 2025 of P327,300 were recorded in the December 2024 cash receipts book. The receipts of
P180,050 represent cash sales and P147,250 represent collections from customers, net of 5% cash discounts.
2. Accounts payable of P186,200 was paid in January 2025. The payments, on which discounts of P6,200 were taken, were
included in the December 2024 check register.
3. Merchandise inventory is valued at P3,025,000 prior to any adjustments. The following information had been found
relating to certain inventory transactions.
a. Goods valued at P137,500 are on consignment with a customer. These goods are not included in the inventory figure.
b. Goods costing P108,750 were received from a vendor on January 4, 2025. The related invoice was received and
recorded on January 6, 2025. The goods were shipped on December 31, 2024, terms FOB shipping point.
c. Goods costing P318,750 were shipped on December 31, 2024, and were delivered to the customer on January 3,
2025. The terms of the invoice were FOB shipping point. The goods were included in the 2024 ending inventory
even though the sale was recorded in 2024.
d. A P91,000 shipment of goods to a customer on December 30, terms FOB destination are not included in the year-end
inventory. The goods cost P65,000 and were delivered to the customer on January 3, 2025. The sale was properly
recorded in 2025.
e. The invoice for goods costing P87,500 was received and recorded as a purchase on December 31, 2024. The related
goods, shipped FOB destination were received on January 4, 2025, and thus were not included in the physical
inventory.
f. Goods valued at P306,400 are on consignment from a vendor. These goods are not included in the physical inventory.
Based on the above and the result of your audit, determine the adjusted balances of the following as of December 31, 2024:
6. Cash Php334,300
7. Accounts receivable Php1,282,000
8. Inventory Php3,017,500
9. Accounts payable Php2,307,950

Problem 3
Orang Dampuan Co. wholesales bicycles. It uses the perpetual inventory system. The company's reporting date is 31
December. At 1 December 2016, inventory on hand consisted of 350 bicycles at P820 each and 43 bicycles at P850 each.
During the month ended 31 December 2016, the following inventory transactions took place (all purchase and sales transactions
are on credit):

Dec. 02 Sold 300 bicycles for P1,200 each.

03 Five bicycles were returned by a customer. They had
originally cost P820 each and were sold for P1,200 each.
09 Purchased 55 bicycles at P910 each.

13 Purchased 76 bicycles at P960 each.

15 Sold 86 bicycles for P1,350 each.
16 Returned one damaged bicycles to the supplier. This
bicycle had been purchased on 9 December.
22 Sold 60 bicycles for P1,250 each.
26 Purchased 72 bicycles at P980 each.
29 Two bicycles, sold on 22 December, were returned by a
 customer. The bicycles were badly damaged so it was
decided to write them off. They had originally cost P910
each.
10. The cost of inventory as of December 31, 2024 using moving average method is (Round unit costs to the nearest peso)
a. P133,672 c. P145,349
b. P143,485 d. P145,285
11. The cost of goods sold for the month of December using moving average method is (Round unit costs to the nearest peso)
a. P367,230 c. P366,320
b. P365,410 d. P372,725
12. The cost of inventory as of December 31, 2024 using FIFO method is _______.
13. The cost of goods sold for the month of December using FIFO method is ________.

Problem 4
The following information pertain to Camil Company’s delivery trucks:
DELIVERY EQUIPMENT
Particulars Debit Credit

01/01/23 Trucks 1,2,3, and 4

P3,200,000
03/15/24 Replacement of Truck
3 tires 25,000
07/01/24 Truck 5 800,000
07/10/24 Reconditioning of
Truck 4, which was
damaged in a collision
35,000
09/01/24 Insurance recovery on
Truck 4 accident
P33,000
10/01/24 Sale of Truck 2 600,000
04/01/25 Truck 6 1,000,000 150,000
05/02/25 Repainting of Truck 4
27,000
06/30/25 Truck 7 720,000
ACCUMULATED DEPRECIATION-DELIVERY EQUIPMENT
Date Particulars Debit Credit
12/31/23 Depreciation expense P300,000
12/31/24 Depreciation expense 300,000
12/31/25 Depreciation expense 300,000
a. On July 1, 2024 Truck 3 was traded in for a new truck, Truck 5, costing P850,000; the selling party allowed a P50,000
trade in value for the old truck.
b. On April 1, 2025, Truck 6 was purchased for P1,000,000; truck 1 and cash of P850,000 being given for the new truck.
c. The depreciation rate is 20% by unit basis.
d. Unit cost of trucks 1 to 4 is at P800,000 each.
Based on the above and the result of your audit, answer the following:
14. How much is the net loss on disposal of trucks in 2024?
a. P510,000 c. P590,000
b. P430,000 d. P230,000

15. What is the loss on trade-in of Truck 1?

a. P410,000 c. P250,000
b. P290,000 d. P150,000
16. What is the adjusted balance of the Delivery Equipment account as of December 31, 2025?
a. P4,170,000 c. P3,170,000
b. P2,650,000 d. P3,370,000
17. The 2016 depreciation expense is understated by:
a. P372,000 c. P 92,000
b. P252,000 d. P292,000

Problem 5
Lodi Department Stores, Inc., constructs its own stores.
Additional information follows:
Total construction expenditures:
January 2, 2015 P 600,000
May 1, 2015 600,000
November 1, 2015 500,000
March 1, 2016 700,000
September 1, 2016 400,000
December 31, 2016 500,000
P 3,300,000
Outstanding company debt:
Mortgage related directly to new store; interest rate,
12%; term, 5 years from beginning of construction P1,000,000
General liability:
Bonds issued just prior to construction of store;
interest rate, 10% for 10 years P 500,000
Bonds issued just prior to construction; interest rate,
8%, mature in 5 years P1,000,000
Estimated cost of equity capital 14%

18. The capitalization rate for general borrowings is __________.

a. 12.0% c. 9.0%
b. 10.0% d. 8.7%
19. The capitalizable borrowing cost for 2024 is __________.
a. P138,850 c. P122,850
b. P127,250 d. P250,000
20. The carrying amount of the building under construction as of December 31, 2024 is _____________.
a. P1,838,850 c. P1,822,850
b. P1,827,250 d. P1,700,000
21. The capitalizable borrowing cost for 2025 is ________________.
a. P255,330 c. P253,938
b. P254,321 d. P250,000.

Problem 6
Knicks Corporation asked you to review its records and prepare corrected financial statements. The books of
accounts are in agreement with the following statement of financial position:
Knicks Corporation
Statement of Financial Position
December 31, 2016
Assets
Cash P 40,000
Accounts receivable 80,000
Notes receivable 24,000
Inventories 200,000
Total assets P344,000
 Liabilities and Owners’ Equity
Accounts payable P 16,000
Notes payable 32,000
Capital stock 80,000
Retained earnings 216,000
Total liabilities and owners’ equity P344,000

A review of the company’s books indicates that the following errors and omissions had not been corrected during the
applicable years:
2013 2014 2015 2016
Ending inventory - overstated
P - P 56,000 P64,000 P -
Ending inventory- understated
48,000 - - 72,000
Prepaid expense 7,200 5,600 4,000 4,800
Unearned income
- 3,200 - 2,400
Accrued expense
1,600 600 800 400
Accrued income - 1,000 - 1,200
No dividends were declared during the years 2013 to 2016 and no adjustments were made to retained earnings. The
company’s books reported the following profit:
2013 P60,000 2015 P52,000
2014 44,000 2016 60,000

Determine the adjusted amounts of the following: (Disregard tax implications)

22. Net income in 2013
a. P99,200 c. P113,600
b. P116,800 d. P17,600
23. Net income (loss) in 2014
a. (P62,800) c. (P59,600)
b. (P14,800) d. P145,200
24. Net income (loss) in 2015
a. P60,400 c. P44,400
b. P44,800 d. (P11,600)
25. Net income (loss) in 2016
a. (P76,000) c. P195,200
b. P194,400 d. P196,000

26. Retained earnings as of December 31, 2016

a. P281,600 c. P292,000
b. P291,200 d. P147,200

Problem 7
Presented below are unaudited balances of selected accounts of Lightning Corporation as of December 31, 2016. During the
course of your audit of Lightning’s books you obtained additional information affecting these accounts.
Debit Credit
Cash P 500,000
Accounts receivable 1,300,000
Allow. for doubtful accounts 8,000
Sales, net P 6,750,000
Accounts payable 600,000
Purchases, net 4,350,000
Cars and trucks 1,200,000
Machinery and equipment 950,000
Accumulated depreciation, machinery and equipment
 Debit Credit
95,000
Additional information:
On December 28, 2016, the company recorded and wrote check payments to creditors amounting to P300,000. A number of
checks amounting to P150,000 were mailed on January 3, 2017.

On December 29, 2016, the company purchased and received goods amounting to P100,000 terms 2/10, n/30. As a policy, the
company records purchases in accounts payable at net amounts. This particular invoice was recorded and paid on January 3,
2017.

On December 26, 2016, a supplier authorized the company to return goods shipped and billed at P80,000 on December 3, 2016.
The goods were returned on December 28, 2016. The supplier’s credit memo was received and recorded on January 5, 2017.

Goods amounting to P50,000 were invoiced for the account of a customer and recorded on January 2, 2017 with terms of net 60
days, FOB shipping point. The goods were shipped on December 30, 2016.

The bank returned on December 29, 2016 a customer check for P5,000 marked “DAIF” but no entry was made.

The company estimates that allowance for uncollectible accounts should be one and one-half percent (1 ½%) of the accounts
receivable balance as of year end. No provision has yet been made for 2016.

All cars and trucks were acquired on May 1, 2016 at a total cost of P1,200,000. The company estimates the useful life of the
cars and trucks as five years and depreciates these assets based on 150% of declining balance. As a policy, depreciation is
computed to the nearest month and rounded off to the nearest peso. No depreciation has been recorded for cars and trucks as
at December 31, 2016.

Based on the above and the result of your audit, answer the following:
27. The adjusted amount of cash as of December 31, 2016 is __________.
a. P500,000 c. P650,000
b. P495,000 d. P645,000
28. The net realizable value of accounts receivable as of December 31, 2016 is _________.
a. P1,326,675 c. P1,329,750
b. P1,334,675 d. P1,280,500
29. The adjusted amount of accounts payable as of December 31, 2016 is _________.
a. P768,000 c. P618,000
b. P848,000 d. P769,600

30. The adjusted carrying amount of property and equipment as of December 31, 2016 is ___________.
a. P1,815,000 c. P1,695,000
b. P1,533,500 d. P1,558,500

Problem 8
You were able to obtain the following information in connection with your audit of the Cash account of the Syria Company as of
December 31, 2024:
November 30 December 31
a. Balances per bank P 480,000 P 420,000

b. Undeposited collections 244,000 300,000

c. Outstanding checks 150,000 120,000

d. The bank statement for the month of December showed total credits of P240,000.
e. DAIF checks are recorded as a reduction of cash receipts. DAIF checks which are later redeposited are then recorded
as regular receipts. Data regarding DAIF checks are as follows:
1. Returned by the bank in Nov. and recorded by the company in Dec., P10,000.
2. Returned by the bank in Dec. and recorded by the company in Dec., P25,000.
3. Returned by the bank in Dec. and recorded by the company in Jan., P29,000.
 f. Check of Syrio Company amounting to P90,000 was charged to the company’s account by the bank in error on
December 31.
g. A bank memo stated that the company’s account was credited for the net proceeds of a customer’s note for P106,000.
h. The company has hypothecated its accounts receivable with the bank under an agreement whereby the bank lends the
company 80% of the hypothecated accounts receivable. The company performs accounting and collection of the
accounts. Adjustments of the loan are made from daily sales reports and deposits.
i. The bank credits the company account and increases the amount of the loan for 80% of the reported sales. The loan
agreement states specifically that the sales report must be accepted by the bank before the company is credited.
Sales reports are forwarded by the company to the bank on the first day following the date of sale. The bank allocates
each deposit 80% to the payment of the loan, and 20% to the company account. Thus, only 80% of each day’s sales
and 20% of each collection deposits are entered on the bank statement. The company accountant records the
hypothecation of new accounts receivable (80% of sales) as a debit to Cash and a credit to the bank loan as of the
date of sales. One hundred percent of the collection on accounts receivable is recorded as a cash receipt; 80% of the
collection is recorded in the cash disbursements books as a payment on the loan. In connection with the
hypothecation, the following facts were determined:
 Included in the undeposited collections is cash from the hypothecation of accounts receivable. Sales
were P180,000 on November 30, and P200,000 at December 31. The balance was made up from
collections which were entered on the books in the manner indicated above.
 Collections on accounts receivable deposited in December, other than deposits in transit, totaled
P725,000.
j. Interest on the bank loan for the month of December charged by the bank but not recorded in the books, amounted to
P38,000.
Based on the above and the result of your audit, answer the following:
31. How much is the unadjusted balance per books as of November 30, 2016?
a. P504,000 c. P430,000
b. P484,000 d. P356,000
32. How much is the unadjusted book receipts for December, 2016?
a. P860,000 c. P735,000
b. P770,000 d. P738,000
33. How much is the unadjusted book disbursements for December, 2016?
a. P773,000 c. P735,000
b. P700,000 d. P760,000

34. How much is the unadjusted balance per books as of December 31, 2016?
a. P481,000 c. P309,000
b. P530,000 d. P539,000

Problem 9
The cost goods sold section of the income statement prepared by your client for the year ended December 31 appears as
follows:
Inventory, January 1 P 80,000
Purchases 1,600,000
Cost of goods available for sale 1,680,000
Inventory, December 31 100,000
Cost of goods sold P1,580,000
Although the books have been closed, your working paper trial balance is prepared showing all accounts with activity during the
year. This is the first time your firm has made an examination. The January 1 and December 31 inventories appearing above
were determined by physical count of the goods on hand on those dates and no reconciling items were considered. All
purchases are FOB shipping point.

In the course of your examination of the inventory cutoff, both at the beginning and end of the year, you discovered the following
facts:
Beginning of the Year
1. Invoices totaling P25,000 were entered in the voucher register in January, but the goods were received during
December.
 2. December invoices totaling P13,200 were entered in the voucher register in December, but goods were not
received until January.
End of the Year
3. Sales of P43,000 (cost of P12,900) were made on account on December 31 and goods delivered at that time, but
all entries relating to the sales were made on January 2.
4. Invoices totaling P15,000 were entered in the voucher register in January, but the goods were received in
December.
5. December invoices totaling P18,000 were entered in the voucher register in December, but the goods were not
received until January.
6. Invoices totaling P12,000 were entered in the voucher register in January, and the goods were received in
January, but the invoices were dated December.

Based on the preceding information, determine the net working paper adjustment that should be made for each of the following
accounts:
35. Retained earnings
a. P13,200 credit c. P25,000 debit
b. P11,800 debit d. P38,200 debit
36. Purchases
a. P27,000 debit c. P25,000 credit
b. P28,000 debit d. P2,000 debit
37. Beginning inventory
a. P25,000 credit c. P13,200 debit
b. P38,200 debit d. P11,800 debit
38. Accounts receivable
a. P43,000 debit c. P30,000 debit
b. P43,000 credit d. No adjustment
39. Sales
a. P43,000 debit c. P30,000credit
b. P43,000 credit d. No adjustment

40. The balance sheet of Alaska Company as of December 31, 2021 shows Cash of P17,500. It was found to include some of
the following items:
Postal money orders from customers Php 2,400
Notes receivable in the possession of a collection agency 3,200
Receipts for expense advances for the account of credit suppliers 600
Customers’ postdated checks, returned by the bank marked “NSF” 1,800
Traveler’s check 500
Currencies and coins on hand 600
Checks in payment of accounts not yet delivered to payee 6,000
PCF (P160 in currency and P840 in expense receipts) 1,000
What is the correct cash balance?
a. P 9,660 c. P 12,860
b. P 11,060 d. P 14,260

41. On December 31, 2020, the cash account of Gambit Company shows the following composition:
Petty cash fund, P180,000; Cash in bank (payroll fund), P2,000,000; Interest and dividend fund, P250,000; Tax fund, P120,000;
Cash in bank (current account), P3,000,000; Certificate of deposit (terms 90 days), P1,000,000; Certificate of deposit (terms 180
days), P1,500,000; Cash in foreign bank-restricted, P500,000; Money market fund, (60 days), P500,000; Money market funds (6
months), P900,000; Customer’s check dated February 15, 2021, P60,000; Customer’s check dated December 30, 2020 returned
for lack of funds, P40,000; A 30-day BSP treasury bill, P1,000,000; A 3-year BSP treasury bill acquired three months prior to
maturity, P1,200,000; Sinking fund cash, P800,000;Contingent fund, P900,000 Fund for the acquisition of fixed asset, P500,000;
Travelers’ checks, P60,000; and Cashiers’ checks, P100,000.
What is the correct cash and cash equivalents balance to be reported by Gambit Company on December 31, 2020?
a. P 7,810,000 c. P 8,910,000
b. P 8,210,000 d. P 9,410,000
42. The following data were taken from the books of an entity for the current year:
From cash records:
Cash purchases P 30,000
Payments to trade creditors for credit purchases 302,600
From balance sheets
Accounts payable
Jan. 1 37,500
Dec. 31 43,300
Merchandise inventory, Jan. 1 12,800
From other records:
Purchase returns and allowances 7,500
Cost of goods for the year 335,000
The merchandise inventory at the end of the year is _________.
a. P12,800 c. P16,200
b. P13,800 d. P23,700

43. Inventory records for an entity revealed the following:

March 1, 2021, inventory: 1,000 gallons@ P7.20 = P7,200
Purchases Sales
Mar. 10 600 gals @ P7.25 Mar. 5 400 gals
16 800 gals @ 7.30 14 700 gals
23 600 gals @ 7.35 20 500 gals
26 700 gals
Ending inventory assuming FIFO in a perpetual inventory system would be:
a. P4,960 c. P5,080
b. P5,060 d. P5,140

Problem 10
Items 44 - 75:
The December 31 year-end financial statements of PAPASA AKO, Inc. contained the following errors:
December 31, 2025 December 31, 2026
Ending Inventory P100,000 understated P90,000 overstated
Depreciation 20,000 understated
An insurance premium of P75,000 was prepaid in 2025 covering the years 2025, 2026 and 2027. The entire amount was
charged to expense in 2025. In addition, on December 31, 2026, fully depreciated machinery was sold for P160,000 cash, but
the sale was not recorded until 2017. There were no other errors during 2025, 2026 and 2027, and no corrections have been
made for any of the errors.
Based on the above and the results of your audit, answer the following:
44. What is the net effect of errors on PAPASA AKO, Inc’s 2025 net income?
a. Understated by P155,000
b. Understated by P130,000
c. Overstated by P70,000
d. No effect
45. What is the net effect of errors on PAPASA AKO, Inc’s 2026 net income?
a. P30,000 overstatement
b. P45,000 understatement
c. P55,000 overstatement
d. P215,000 overstatement
46. What is the net effect of the errors on the company’s working capital at December 31, 2026?
a. Understated by P95,000
b. Overstated by P90,000
c. Understated by P70,000
d. No effect.
47. What is the net effect of the errors on the balance of PAPASA AKO’s retained earnings at December 31, 2026?
a. P110,000 understatement
b. P75,000 understatement
c. P50,000 understatement
d. No effect

Problem 11
Shown below is the bank reconciliation for Marikina Company for November 2027:
Balance per bank, Nov. 30, 2027 P150,000
Add: Deposits in transit 24,000
Total 174,000
Less: Outstanding checks P28,000
Bank credit recorded in error 10,000 38,000
Cash balance per books, Nov. 30, 2027 P136,000
The bank statement for December 2027 contains the following data:
Total deposits P110,000
Total charges, including an NSF check of P8,000 and a service charge
of P400 96,000
All outstanding checks on November 30, 2027, including the bank credit, were cleared in the bank in December 2027.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31, 2027.

Based on the above and the result of your audit, answer the following:
48. How much is the cash balance per bank on December 31, 2027? Php164,000
49. How much is the December receipts per books? Php124,000
50. How much is the December disbursements per books? Php79,600

51. How much is the cash balance per books on December 31, 2027? Php180,400
52. The adjusted cash in bank balance as of December 31, 2027 is _______. Php172,000

Problem 12
The following are two (2) unrelated situations. Answer the questions at the end of each situation.
Situation 1
The December 31 year-end financial statements of COPYAKANGCOPYASAKATABIMO COMPANY contained the following
errors:
Dec. 31, 2014 Dec. 31, 2015
Ending inventory P48,000 understated P40,500 overstated
Depreciation expense P11,500 understated -------

An insurance premium of P330,000 was prepaid in 2014 covering the years 2014, 2015, and 2016. The entire amount was
charged to expense in 2014. In addition, on December 31, 2015, a fully depreciated machinery was sold for P75,000 cash, but
the sale was not recorded until 2016. There were no other errors during 2014 and 2015, and no corrections have been made for
any of the errors. Ignore income tax effects.
53. What is the total effect of the errors 2015 net income?
a. P123,500 overstatement
b. P27,500 overstatement
c. P192,500 understatement
d. P177,500 understatement
54. What is the total effect of the errors on the amount of working capital at December 31, 2015?
a. P75,500 overstatement
b. P40,500 overstatement
c. P225,500 understatement
d. P144,500 understatement
55. What is the total effect of the errors on the balance of retained earnings at December 31, 2015?
a. P156,000 understatement
b. P87,000 overstatement
c. P133,000 understatement
d. P85,000 understatement
Situation 2
CHILE CO. reported pretax incomes of P505,000 and P387,000 for the years ended December 31, 2014 and 2015, respectively.
However, the auditor noted that the following errors had been made:
a. Sales for 2014 included amounts of P191,000 which had been received in cash during 2014, but for which the
related goods were shipped in 2015. Title did not pass to the buyer until 2015.
b. The inventory on December 31, 2014, was understated by P43,200.
c. The company’s accountant, in recording interest expense for both 2014 and 2015 on bonds payable, made the
following entry on an annual basis:
Interest expense 75,000
Cash 75,000
The bonds have a face value of P1,250,000 and pay a nominal interest rate of 6%. They were issued at a discount of P75,000
on January 1, 2014, to yield an effective interest rate of 7%.

Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2014 and 2015. Repairs of
P42,500 and P47,000 had been incurred in 2014 and 2015, respectively. In determining depreciation charges, Chile applies a
rate of 10% to the balance in the Equipment account at the end of the year.
56. What is the corrected pretax income for 2014?
a. P303,200 b. P225,300 c. P311,700 d. P307,450
57. What is the corrected pretax income for 2015?
a. P480,042 b. P484,292 c. P575,392 d. P488,992

Problem 13
Use the following information for the next five questions.

The following data were taken from your current working papers in connection with your audit of the Mage Company’s financial
statements for the year ended Dec. 31, 2021.

Cash account consists of the following items:

Petty cash fund P 25,000

Security Bank checking account ( 37,500)
Allied Bank current account 344,250
Total per GL P331,750

The count of the cashier’s accountability on Jan. 2, 2022, revealed total bills and coins of P9,000. Unreplenished vouchers for
various expenses totaled P16,000, of which P3,000 pertains to Jan. 2022.

On Dec. 29, 2021, a check for P87,500 was drawn against Security Bank current account resulting in bank overdraft of P37,500.
The check was picked up by the supplier on Jan. 3, 2022.

Bank reconciliation statement prepared by the cashier for the Allied Bank account follows:

Bank balance P310,500

Add: Deposit in transit P61,250
Bank service charges
1,250 62,500
Total 373,000
Less: Outstanding checks
Check No. Amount
214 P 2,500 @

219 20,750
225 6,000
228 8,500 28,750
Book balance P344,250
@
Check certified by the bank in Dec. 2021.
All reconciling items were traced to the bank statement. Further investigation indicated that the deposits in transit include a
customer’s post-dated check amounting to P40,000. The check represents a collection from account customer for sales made in
the middle of Oct. 2021.

Based on the above and the result of your audit, answer the following:
58. How much is the adjusted balance of petty cash fund as of Dec. 31, 2021?
a. P12,000 c. P13,000
b. P 9,000 d. P16,000
59. How much is the adjusted Allied Bank current account as of Dec. 31, 2021?
a. P336,500 c. P305,500
b. P296,500 d. P330,250
60. How much is the cash shortage as of Dec. 31, 2021?
a. P46,500 c. P6,500
b. P 9,000 d. P 0
61. How much is the adjusted cash as of Dec. 31, 2021?
a. P355,500 c. P398,500
b. P367,500 d. P358,500

Problem 14
Use the following information for the next five questions.

The adjusted trial balance of Optimistic Corporation on Dec. 31, 2021, includes the following cash and receivables balances.

Cash-Allied Bank P450,000

Currency on hand 160,000
Petty cash fund 10,000
Cash in bond sinking fund 150,000
Notes receivable (including notes discounted with recourse, 365,000
P155,000)
Accounts receivable P856,000
Allowance for doubtful accounts ( 41,500) 814,500
Interest receivable 5,250

Current liabilities reported in the Dec. 31, 2021, statement of financial position included:

Obligation on discounted notes receivable P155,000

Transactions during 2022 included the following:

Sales on account were P7,670,000.
Cash collected on accounts totaled P5,765,000, including accounts of P930,000 with cash discounts of 2%.
Notes received in settlement of accounts totaled P825,000.
Notes receivable discounted as of Dec. 31, 2021, were paid at maturity with the exception of one P30,000 note on which the
company had to pay the bank P30,900, which include interest and protest fees. It is expected that recovery will be made on this
note early in 2023.
Customer notes of P585,000 were discounted with recourse during the year, proceeds from their transfer being P585,000. (All
discounting transactions were recorded as loans.) Of this total, P480,000 matured during the year without notice of protest.
Customer accounts of P87,200 were written off during the year as worthless.
Recoveries of bad debts written off in prior years were P20,200.
Notes receivable collected during the year totaled P270,000 and interest collected was P24,500.
On Dec. 31, accrued interest on notes receivable was P6,300.
Cash of P350,000 was borrowed from Allied Bank with accounts receivable of P400,000 being pledged on the loan. Collections
of P195,000 had been made on these receivables [included in the total given in transaction (b)], and this amount was applied on
Dec. 31, 2022, to payment of accrued interest on the loan of P6,000, and the balance to the partial payment of the loan.
The petty cash fund was reimbursed (meaning that cash was removed from the bank account and placed in the petty cash fund)
based following analysis of expenditure vouchers:

Travel expense P1,120

Entertainment expense 780
 Postage expense 930
Office supplies expense 1,730
Cash short and over (an income account) 60
Cash of P30,000 was added to bond retirement fund.
Currency on hand at Dec. 31, 2022, was P120,000.
Total cash payments for all expenses during the year were P6,800,000. Charge to general expenses.
Uncollectible accounts are estimated to be 5% of the Dec. 31, 2022, Accounts Receivable balance.

QUESTIONS:

Based on the above and the result of your audit, answer the following:

62. The total cash to be reported in the company’s Dec. 31, 2022 statement of financial position is
a. P555,700 c. P574,180
b. P574,300 d. P569,800

63. The doubtful accounts expense to be recognized for the year ended Dec. 31, 2022 is
a. P117,010 c. P117,940
b. P 91,510 d. P 92,440

64. The net accounts receivable as of Dec. 31, 2022 is

a. P1,713,190 c. P1,738,690
b. P1,730,860 d. P1,756,360

65. The net trade and other receivables to be reported in the company’s Dec. 31, 2022 statement of financial position is
a. P2,023,690 c. P2,072,260
b. P2,078,560 d. P2,060,890

Problem 15
An entity reported cash and cash equivalents of P7,000,000 in its statement of financial position as of Dec. 31, 2023. This
amount includes the following:
Cryptocurrencies, P550,000. These are not held for sale in the ordinary course of business nor for investment purposes.
Fund for acquisition of equipment, P800,000.
Cash surrender value of life insurance policy, P100,000.
Customer’s check for P170,000 dated Jan. 2, 2024, received on Dec. 29, 2023.
Check written and dated Dec. 29, 2023 and delivered to payee on Jan. 2, 2024, P200,000.
Check written on Dec. 27, 2023, dated Jan. 2, 2024, delivered to payee on Dec. 29, 2023, P300,000.
Equity investment held for trading expected to be sold within 3 months, P600,000.

66. Compute for the adjusted cash and cash equivalents.

a. P4,780,000 c. P5,330,000
b. P5,280,000 d. P5,380,000

Problem 16
An entity reported cash and cash equivalents of P12,000,000 in its statement of financial position as of Dec. 31, 2023. This
amount includes the following:
Customer’s check for P100,000 returned by bank on Dec. 29, 2023 due to insufficient fund but subsequently redeposited and
cleared by the bank on Jan. 3, 2024.
Customer’s check for P200,000 dated Jan. 2, 2024, received on Dec. 29, 2023.
Cash earmarked for bonds payable due on June 30, 2024, P5,000,000.
P1,000,000 of compensating balance against short-term borrowing arrangement at Dec. 31, 2023. The compensating balance is
legally restricted as to withdrawal.
Check written and dated Dec. 29, 2023 and delivered to payee on Jan. 2, 2024, P500,000.
Check written on Dec. 27, 2023, dated Jan. 2, 2024, delivered to payee on Dec. 29, 2023, P800,000.
One-year certificate of deposit, P2,000,000.

67. Compute for the adjusted cash and cash equivalents.

a. P3,700,000 c. P 8,700,000
b. P5,700,000 d. P10,000,000
Problem 17
Presented below is a list of items that may or may not be reported as inventory in an entity’s Dec. 31 statement of financial
position.

Goods purchased FOB shipping point (in transit) P120,000

Goods purchased FOB destination (in transit) 200,000
Freight charges on goods purchased 80,000
Materials on hand not yet placed into production 350,000
Factory supplies 20,000
Office supplies 10,000
Interest cost incurred for inventories that are routinely manufactured 40,000
Costs identified with units started but which are not yet completed 280,000
Costs identified with units completed but not yet sold 310,000
Goods out on consignment at another company’s store 800,000
Goods held on consignment from another company 450,000
Goods sold on installment basis 100,000
Goods sold to another company, for which the company has signed an agreement to repurchase
at a set price that covers all costs related to the inventory
300,000
Goods sold FOB seller (in transit) 120,000
Goods sold FOB buyer (in transit) 40,000
Costs incurred to advertise goods held for resale 20,000
Securities acquired for the purpose of selling in the near term 500,000
Equipment held for sale in accordance with PFRS 5 80,000
Cryptocurrencies that are not held for sale in the ordinary course of business nor for investment
purposes. 180,000

68. How much of these items would typically be reported as inventories in the statement of financial position?
a. P2,300,000 c. P2,220,000
b. P2,260,000 d. P2,000,000

Problem 18
An entity reported property, plant and equipment of P20,000,000 in its statement of financial position as of Dec. 31, 2023. This
amount includes the following:
Land held for undetermined future use, P3,000,000.
Property occupied by employees, P8,000,000. The employees pay rent at market rates.
Equipment held to earn rentals under operating lease, P1,200,000.

69. Compute for the adjusted property, plant and equipment.

a. P 9,000,000 c. P17,000,000
b. P15,800,000 d. P17,800,000

Problem 19
Use the following information for the next five questions.

On an audit engagement for 2020, you handled the audit of fixed assets of Mongol Copper Mines. This mining company bought
the exploration rights of Haven Mineral Exploration on June 30, 2020 for P14,580,000. Of this purchase price, P9,720,000 was
allocated to copper ore which had remaining reserves estimated at 1,620,000 tons. Mongol Copper Mines expects to extract
15,000 tons of ore a month with an estimated selling price of P50 per ton. Production started immediately after some new
machineries costing P1,200,000 were bought on June 30, 2020. These new machineries had an estimated useful life of 15
years with a scrap value of 10% of cost after the ore estimate has been extracted from the property, at which time the
machineries will be useless.

Among the operating expenses of Mongol Copper Mines at December 31, 2020 were:
Depletion expense P810,000
Depreciation, machineries 80,000

70. Recorded depletion expense was

a. Overstated by P180,000
b. Understated by P180,000
c. Overstated by P270,000
d. Understated by P270,000

71. Recorded depreciation expense was

a. Overstated by P20,000
b. Understated by P20,000
c. Overstated by P40,000
d. Understated by P40,000

72. The audited carrying value of the machinery as of December 31, 2020 is
a. P1,080,000
b. P1,120,000
c. P1,140,000
d. P1,280,000

73. The audited carrying value of the copper ore (wasting asset) as of December 31,2020 is
a. P9,810,000
b. P9,720,000
c. P9,210,000
d. P9,180,000

Problem 20
Use the following information for the next five questions.

The following information pertain to Teal Company’s delivery trucks:

DELIVERY EQUIPMENT
Date Particulars Debit Credit
01/01/18 Trucks 1,2,3, and 4 P3,200,000
03/15/19 Replacement of Truck 3 tires 25,000
07/01/19 Truck 5 800,000
07/10/19 Reconditioning of Truck 4, which was damaged in a collision 35,000
09/01/19 Insurance recovery on Truck 4 accident P33,000
10/01/19 Sale of Truck 2 600,000
04/01/20 Truck 6 1,000,000 150,000
05/02/20 Repainting of Truck 4 27,000
06/30/20 Truck 7 720,000

ACCUMULATED DEPRECIATION-DELIVERY EQUIPMENT

Date Particulars Debit Credit
12/31/18 Depreciation expense P300,000
12/31/19 Depreciation expense 300,000
12/31/20 Depreciation expense 300,000

On July 1, 2019, Truck 3 was traded in for a new truck, Truck 5, costing P850,000; the selling party allowed a P50,000 trade in
value for the old truck.

On April 1, 2020, Truck 6 was purchased for P1,000,000; truck 1 and cash of P850,000 being given for the new truck.

The depreciation rate is 20% by unit basis.

Unit cost of trucks 1 to 4 is at P800,000 each.

QUESTIONS:
Based on the above and the result of your audit, answer the following:
74. How much is the net loss on disposal of trucks in 2019?
a. P590,000
b. P510,000
c. P430,000
d. P230,000
75. What is the loss on trade-in of Truck 1?
a. P410,000
b. P290,000
c. P250,000
d. P150,000

76. What is the adjusted balance of the Delivery Equipment account as of December 31, 2020?
a. P4,170,000
b. P3,370,000
c. P3,170,000
d. P2,650,000

77. The 2020 depreciation expense is understated by:

a. P372,000
b. P292,000
c. P252,000
d. P 92,000

Problem 21
Use the following information for the next five questions.

You requested a depreciation schedule for Delivery Trucks of Apatheia Corp. showing the additions, retirements, depreciation
and other data affecting the income of the entity in the 4-year period 2020 to 2023, inclusive. The Delivery Trucks account
consists of the following as of Jan. 1, 2020:

Truck No. 1 purchased Jan. 1, 2017, cost P 180,000

Truck No. 2 purchased July 1, 2017, cost 220,000
Truck No. 3 purchased Jan. 1, 2019, cost 300,000
Truck No. 4 purchased July 1, 2019, cost 240,000
P 940,000

The Delivery Trucks–Accumulated Depreciation account previously adjusted to Jan. 1, 2020, and duly entered to the ledger, had
a balance on that date of P302,000 (depreciation on the 4 trucks from respective date of purchase, based on five-year life, no
salvage value). No charges have been made against the account before Jan. 1, 2020.

Transactions between Jan. 1, 2020 and Dec. 31, 2023, and their record in the ledger were as follows:

July 1, 2020 – Truck No. 3 was traded for larger one (No. 5), the agreed purchase price of which was P340,000. Cheerful Mfg.
Co. paid the automobile dealer P150,000 cash on the transaction. The entry was debit to Delivery Trucks and a credit to Cash,
P150,000.

Jan. 1, 2021 – Truck No. 1 was sold for P35,000 cash; entry debited Cash and credited Delivery Trucks, P35,000.

July 1, 2022 – A new truck (No. 6) was acquired for P360,000 cash and was charged at that amount to Delivery Trucks account.
(Assume truck No. 2 was not retired.)

July 1, 2022 – Truck No. 4 was damaged in a wreck to such an extent that it was sold as junk for P7,000 cash. Cheerful Mfg. Co.
received P25,000 from the insurance company. The entry made by the bookkeeper was a debit to cash, P32,000, and credits to
Miscellaneous Income, P7,000 and Delivery Trucks P 25,000.

Entries for depreciation had been made for the close of each year as follows: 2020, P203,000; 2021, P211,000; 2022, P244,500;
2023, P278,000.
QUESTIONS:
Based on the given information and the result of your audit, determine the following:
78. The 2020 profit is overstated by
a. P 9,000 c. P31,000
b. P20,000 d. P 0

79. The 2021 profit is understated by

a. P51,000 c. P16,000
b. P50,000 d. P 0

80. The 2022 profit is understated by

a. P23,500 c. P94,500
b. P64,500 d. P 0

81. The adjusted carrying amount of Delivery Trucks as of December 31, 2023 is
a. P885,400 c. P354,000
b. P504,000 d. P284,000

Problem 22
Use the following information for the next five questions.

In connection with your audit of Stillness Corp. for the year ended Dec. 31, 2023, you found the following information relating to
certain inventory transactions from your observation of the client’s physical count and review of sales and purchases cutoff:

Goods costing P180,000 were received from a vendor on Jan. 3, 2024. The related invoice was received and recorded on Dec.
30, 2023. The goods were shipped on Dec. 31, 2023, terms FOB shipping point.

Goods costing P200,000, sold for P300,000, were shipped on Dec. 31, 2023, and were received by the customer on Jan. 2,
2024. The terms of the invoice were FOB shipping point. The sale was recorded in 2024.

The invoice for goods costing P150,000 was received and recorded as a purchase on Dec. 31, 2023. The related goods, shipped
FOB destination, were received on Jan. 2, 2024.

A P600,000 shipment of goods to a customer on Dec. 30, 2023, terms FOB destination, was recorded as a sale upon shipment.
The goods, costing P400,000, were received by the customer on Jan. 6, 2024.

Goods costing P250,000 were received and recorded as a purchase on Dec. 31, 2023. These goods are held on consignment
from a vendor.

Goods costing P160,000, recorded as a sale upon shipment for P240,000, were shipped on Dec. 31, 2023. These goods are out
on consignment with the customer and sold to a third party on Jan. 5, 2024.

QUESTIONS:
Based on the given information and the result of your audit, answer the following:
82. The inventory as of Dec. 31, 2023 is understated by
a. P140,000 c. P490,000
b. P330,000 d. P580,000
83. The cost of sales for the year ended Dec. 31, 2023 is overstated by
a. P290,000 c. P890,000
b. P730,000 d. P980,000
84. The profit for the year ended Dec. 31, 2023 is misstated by
a. P 10,000 c. P350,000
b. P190,000 d. P430,000
85. The working capital as of Dec. 31, 2023 is misstated by
a. P 10,000 c. P350,000
b. P190,000 d. P430,000
Problem 23
Use the following information for the next five questions.
You were engaged to perform an audit of the accounts of the Honesty Corporation for the year ended December 31, 2020, and
you observed the taking of the physical inventory of the company on December 30, 2020. Only merchandise shipped by the
company to customers up to and including December 30, 2020 have been eliminated from inventory. The inventory as
determined by physical inventory count has been recorded on the books by the company’s controller. No perpetual inventory
records are maintained. All sales are made on an FOB shipping point basis. You are to assume that all purchase invoices have
been correctly recorded. The inventory was recorded through the cost of sales method.

The following lists of sales invoices are entered in the sales books for the month of December 2020 and January 2021,
respectively.

DECEMBER 2020
Sales Sales
invoice invoice
amount date Cost Date shipped
a) P150,000 Dec. 21 P100,000 Dec. 31, 2020
b) 100,000 Dec. 31 40,000 Nov. 03, 2020
c) 50,000 Dec. 29 30,000 Dec. 30, 2020
d) 200,000 Dec. 31 120,000 Jan. 03, 2021
e) 500,000 Dec. 30 280,000 Dec. 29, 2020
(shipped to
consignee)

JANUARY 2021
f) P300,000 Dec. 31 P200,000 Dec. 30, 2020
g) 200,000 Jan. 02 115,000 Jan. 02, 2021
h) 600,000 Jan. 03 475,000 Dec. 31, 2020

QUESTIONS:
Based on the above and the result of your audit, answer the following:

86. Sales for the year ended December 31, 2020 is misstated by
A. P100,000 over C. P200,000 over
B. P100,000 under D. P200,000 under
87. Profit for the year ended December 31, 2020 is misstated by
A. P25,000 under C. P195,000 over
B. P95,000 over D. P380,000 under
88. Inventory as of December 31, 2020 is misstated by
A. P175,000 over C. P295,000 over
B. P180,000 under D. P455,000 over
89. Working capital as of December 31, 2020 is misstated by
A. P25,000 under C. P195,000 over
B. P95,000 over D. P380,000 under

Problem 24
Use the following information for the next five questions.

Calamba Company engaged you to examine its books and records for the fiscal year ended June 30, 2020. The company’s
accountant has furnished you not only the copy of trial balance as of June 30, 2020 but also the copy of company’s statement of
financial position and statement of comprehensive income as at said date. The following data appears in the cost of goods sold
section of the statement of comprehensive income:
 Inventory, July 1, 2019 P 500,000
Add Purchases 3,600,000
Total goods available for sale 4,100,000
Less Inventory, June 30, 2020 700,000
Cost of goods sold P3,400,000

The beginning and ending inventories of the year were ascertained thru physical count except that no reconciling items were
considered. Even though the books have been closed, your working paper trial balance show all account with activity during the
year. All purchases are FOB shipping point. The company is on a periodic inventory basis.

In your examination of inventory cut-offs at the beginning and end of the year, you took note of the following:

July 1, 2019

June invoices totaling to P130,000 were entered in the voucher register in June. The corresponding goods not received until
July.

Invoices totaling P54,000 were entered in the voucher register in July but the goods received during June.

June 30, 2020

Invoices with an aggregate value of P186,000 were entered in the voucher register in July, and the goods were received in July.
The invoices, however, were date June.

June invoices totaling P74,000 were entered in the voucher register in June but the goods were not received until July.

Invoices totaling P108,000 (the corresponding goods for which were received in June) were entered the voucher register, July.

Sales on account in the total amount of P176,000 were made on June 30 and the goods delivered at that time. Book entries
relating to the sales were made in June.

QUESTIONS:
Based on the above and the result of your cut-off tests, answer the following:
90. How much is the adjusted Inventory as of July 1, 2019?
a. P370,000
b. P500,000
c. P576,000
d. P630,000

91. How much is the adjusted Purchases for the fiscal year ended June 30, 2020?
a. P3,600,000
b. P3,840,000
c. P3,894,000
d. P3,914,000

92. How much is the adjusted Inventory as of June 30, 2020?

a. P500,000
b. P784,000
c. P892,000
d. P960,000

93. How much is the adjusted Cost of Goods Sold for the fiscal year ended June 30, 2020?
a. P3,316,000
b. P3,510,000
c. P3,564,000
d. P3,970,000
94. The necessary compound adjusting journal entry as of June 30, 2020 would include a net adjustment to Retained Earnings of
a. P54,000
b. P76,000
c. P130,000
d. P184,000

Problem 25
Use the following information for the next five questions.
You were able to obtain the following information in connection with your audit of the Cash account of the Aslama Corp. as of
Dec. 31, 2023:

Nov. 30 Dec. 31
Balances per bank P480,000 P420,000
Undeposited collections 244,000 300,000
Outstanding checks 150,000 120,000

The bank statement for the month of Dec. showed total credits of P240,000.

DAIF checks are recorded as a reduction of cash receipts. DAIF checks which are later redeposited are then recorded as regular
receipts. Data regarding DAIF checks are as follows:
Returned by the bank in Nov. and recorded by the company in Dec., P10,000.
Returned by the bank in Dec. and recorded by the company in Dec., P25,000.
Returned by the bank in Dec. and recorded by the company in Jan., P29,000.

Check of another company amounting to P90,000 was charged to the Aslama’s account by the bank in error on Dec. 31.

A bank memo stated that the company’s account was credited for the net proceeds of a customer’s note for P106,000.

The company has hypothecated its accounts receivable with the bank under an agreement whereby the bank lends the company
80% of the hypothecated accounts receivable. The company performs accounting and collection of the accounts. Adjustments of
the loan are made from daily sales reports and deposits.

The bank credits the company account and increases the amount of the loan for 80% of the reported sales. The loan agreement
states specifically that the sales report must be accepted by the bank before the company is credited. Sales reports are
forwarded by the company to the bank on the first day following the date of sale. The bank allocates each deposit 80% to the
payment of the loan, and 20% to the company account. Thus, only 80% of each day’s sales and 20% of each collection deposits
are entered on the bank statement. The company accountant records the hypothecation of new accounts receivable (80% of
sales) as a debit to Cash and a credit to the bank loan as of the date of sales. One hundred percent of the collection on accounts
receivable is recorded as a cash receipt; 80% of the collection is recorded in the cash disbursements books as a payment on the
loan. In connection with the hypothecation, the following facts were determined:
Included in the undeposited collections is cash from the hypothecation of accounts receivable. Sales were P180,000 on Nov. 30,
and P200,000 at Dec. 31. The balance was made up from collections which were entered on the books in the manner indicated
above.

Collections on accounts receivable deposited in Dec., other than deposits in transit, totaled P725,000.

Interest on the bank loan for the month of Dec. charged by the bank but not recorded in the books, amounted to P38,000.

QUESTIONS:
Based on the given information and the result of your audit, answer the following:

95. How much is the unadjusted balance per books as of Nov. 30, 2023?
a. P504,000 c. P430,000
b. P484,000 d. P356,000
96. How much is the unadjusted book receipts for Dec., 2023?
a. P860,000 c. P735,000
b. P770,000 d. P738,000
97. How much is the unadjusted book disbursements for Dec., 2023?
a. P773,000 c. P735,000
b. P700,000 d. P760,000
98. How much is the unadjusted balance per books as of Dec. 31, 2023?
a. P481,000 c. P309,000
b. P530,000 d. P539,000

Problem 26
Use the following information for the next five questions.

You were able to obtain the following information from your audit of Confident Corporation’s Accounts Receivable and Allowance
for Doubtful Accounts:

From the general ledger you noted that the Accounts Receivable has a balance of P848,000 as of Dec. 31, 2021. Below is a
transcript of the Allowance for Doubtful Accounts:

Debit Credit Balance

1/1 – Balance P20,000
7/31 – Write-off P16,000 4,000
12/31- Provision P48,000 P52,000

The summary of the subsidiary ledger as of Dec. 31, 2021 was totaled as follows:

Debit balances:

Under one month P360,000

One to six months 368,000
Over six months 152,000
P880,000

Credit balances:

B. B. Koh P 8,000 - OK; additional billing in Jan., 2022

V. B. Nya 14,000 - Should have been credited to V. Yan*
Ha Lah 18,000 - Advances on sales contract
P40,000

*Account is one to six months classification

The customers’ ledger is not in agreement with the accounts receivable control. The client requested you to adjust the control
account to the subsidiary ledger after corrections are made.

It is agreed that 1 percent is adequate for accounts under one month. Accounts one to six months are expected to require a
reserve of 2 percent. Accounts over six months are analyzed as follows:

Definitely bad P 48,000

Doubtful (estimated to be 50% collectible) 24,000
Apparently good, but slow
(estimated to be 90% collectible) 80,000
Total P152,000

QUESTIONS:
Based on the given information and the result of your audit, answer the following:

99. How much is the adjusted balance of Accounts Receivable as of Dec. 31, 2021?
a. P818,000 c. P832,000
b. P826,000 d. P846,000
100. How much is the adjusted balance of the Allowance for Doubtful Accounts as of Dec. 31, 2021?
a. P30,680 c. P30,960
b. P30,760 d. P31,240
101. How much is the Doubtful Accounts expense for the year 2021?
a. P74,680 c. P74,960
b. P74,760 d. P75,240